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Producer Services, Manufacturing Linkages, and Trade

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  • Joseph Francois
  • Julia Woerz

    (wiiw)

Abstract

Working with a mix of panel data on goods and services trade for the OECD for 1994-2004, combined with social accounts data (i.e. data on intermediate linkages) for 78 countries benchmarked to 2001, we examine the role of services as inputs in manufacturing, with a particular focus on indirect exports of services through merchandise exports, and also on the related interaction between service sector openness and the overall pattern of manufacturing exports. From the crosssection, we also develop a set of stylized facts linking services to level of development and the density of intermediate linkages. We find significant and strong positive effects from increased business service openness (i.e. greater levels of imports) on industries like machinery, motor vehicles, chemicals and electric equipment, supporting the notion that off-shoring of business services may promote the competitiveness of the most skill and technology intensive industries in the OECD. Conversely, we find evidence of negative general equilibrium effects for sectors that are less service intensive.

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Bibliographic Info

Paper provided by FIW in its series FIW Working Paper series with number 002.

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Length: 44
Date of creation: May 2007
Date of revision:
Handle: RePEc:wsr:wpaper:y:2007:i:002

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Keywords: Producer Services; Service Sector Openess; Manufacturing linkages; Trade in Services; Indirect export of Services; Manufacturing Sector;

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References

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  1. Park, Se-Hark & Chan, Kenneth S., 1989. "A cross-country input-output analysis of intersectoral relationships between manufacturing and services and their employment implications," World Development, Elsevier, vol. 17(2), pages 199-212, February.
  2. Stephen Ross Yeaple, 2006. "Offshoring, Foreign Direct Investment, and the Structure of U.S. Trade," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 602-611, 04-05.
  3. Baumol, William J. & Batey Blackman, Sue Anne & Wolff, Edward N., 1984. "Unbalanced Growth Revisited: Asymptotic Stagnancy and New Evidence," Working Papers 84-02, C.V. Starr Center for Applied Economics, New York University.
  4. Park, Se-Hark, 1989. "Linkages between industry and services and their implications for urban employment generation in developing countries," Journal of Development Economics, Elsevier, vol. 30(2), pages 359-379, April.
  5. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
  6. Francois, Joseph & Grier, Kevin Blaine & Nelson, Douglas, 2004. "Globalization, Roundaboutness and Relative Wages," CEPR Discussion Papers 4406, C.E.P.R. Discussion Papers.
  7. Feenstra, Robert C & Hanson, Gordon H, 1996. "Globalization, Outsourcing, and Wage Inequality," American Economic Review, American Economic Association, vol. 86(2), pages 240-45, May.
  8. Markusen, James R., 2005. "Modeling the Offshoring of White-Collar Services: From Comparative Advantage to the New Theories of Trade and FDI," CEPR Discussion Papers 5408, C.E.P.R. Discussion Papers.
  9. Katouzian, M A, 1970. "The Development of the Service Sector: A New Approach," Oxford Economic Papers, Oxford University Press, vol. 22(3), pages 362-82, November.
  10. Smarzynska, Beata K., 2002. "Does foreign direct investment increase the productivity of domestic firms : in search of spillovers through backward linkages," Policy Research Working Paper Series 2923, The World Bank.
  11. Robert Feenstra & Gordon Hanson, 2001. "Global Production Sharing and Rising Inequality: A Survey of Trade and Wages," NBER Working Papers 8372, National Bureau of Economic Research, Inc.
  12. Markusen, James R, 1989. "Trade in Producer Services and in Other Specialized Intermediate Inputs," American Economic Review, American Economic Association, vol. 79(1), pages 85-95, March.
  13. James Markusen & Thomas Rutherford & David Tarr, 2005. "Trade and direct investment in producer services and the domestic market for expertise," Canadian Journal of Economics, Canadian Economics Association, vol. 38(3), pages 758-777, August.
  14. Markusen, James R & Venables, Anthony J, 1997. "The Role of Multinational Firms in the Wage-Gap Debate," Review of International Economics, Wiley Blackwell, vol. 5(4), pages 435-51, November.
  15. Hoekman, Bernard, 2006. "Liberalizing trade in services : a survey," Policy Research Working Paper Series 4030, The World Bank.
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Citations

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Cited by:
  1. Davide CASTELLANI & Valentina MELICIANI & Loredana Mirra, 2012. "The determinants of inward foreign direct investment in business services across european regions," Quaderni del Dipartimento di Economia, Finanza e Statistica 104/2012, Università di Perugia, Dipartimento Economia, Finanza e Statistica.
  2. Joseph Francois & Ian Wooton, 2010. "Market Structure and Market Access," The World Economy, Wiley Blackwell, vol. 33(7), pages 873-893, 07.
  3. Tommaso Ciarli & Valentina Meliciani & Maria Savona, 2012. "Knowledge Dynamics, Structural Change And The Geography Of Business Services," Journal of Economic Surveys, Wiley Blackwell, vol. 26(3), pages 445-467, 07.
  4. Shepotylo Oleksandr & Vakhitov Volodymyr, 2012. "Impact of services liberalization on productivity of manufacturing firms: evidence from Ukrainian firm-level data," EERC Working Paper Series 12/01e, EERC Research Network, Russia and CIS.
  5. Lodefalk, Magnus, 2012. "The Role of Services for Manufacturing Firms’ Exports," Working Papers 2012:10, Örebro University, School of Business.
  6. Elisabeth M. Christen & Joseph Francois & Bernard Hoekman, 2012. "CGE Modeling of Market Access in Services," Economics working papers 2012-08, Department of Economics, Johannes Kepler University Linz, Austria.
  7. Alistair Dieppe & Stephane Dees & Pascal Jacquinot & Tohmas Karlsson & Chiara Osbat & Selin Özyurt & Igor Vetlov & Axel Jochem & Zacharias Bragoudakis & Dimitris Sideris & Patry Tello & Jean Charles , 2012. "Competitiveness and external imbalances within the euro area," Occasional Paper Series 139, European Central Bank.
  8. Markus Kelle, 2012. "Crossing Industrial Borders: German Manufacturers as Services Exporters," Development Working Papers 329, Centro Studi Luca d\'Agliano, University of Milano, revised 27 Mar 2012.
  9. Massimo Armenise & Giorgia Giovannetti & Gianluca Santoni, 2011. "FDI in Business Services has general TFP effects : evidence from Italy," Working Papers Series wp2011_12.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze dell'Economia e Dell'Impresa.
  10. Shepotylo, Oleksandr & Vakhitov, Volodymyr, 2012. "Services liberalization and productivity of manufacturing firms : evidence from Ukraine," Policy Research Working Paper Series 5944, The World Bank.
  11. Fernandes, Ana M. & Paunov, Caroline, 2008. "Foreign direct investment in services and manufacturing productivity growth: evidence for Chile," Policy Research Working Paper Series 4730, The World Bank.
  12. Maroto-Sánchez, Andrés & Cuadrado-Roura, Juan R., 2009. "Is growth of services an obstacle to productivity growth? A comparative analysis," Structural Change and Economic Dynamics, Elsevier, vol. 20(4), pages 254-265, December.
  13. Falk, Martin & Peng, Fei, 2011. "The increasing service intensity of European manufacturing," MPRA Paper 38600, University Library of Munich, Germany.
  14. Christen, Elisabeth & Francois, Joseph, 2010. "Modes of Delivery in Services," CEPR Discussion Papers 7912, C.E.P.R. Discussion Papers.
  15. Bianka Dettmer, 2012. "Business services outsourcing and economic growth: Evidence from a dynamic panel data approach," Jena Economic Research Papers 2012-049, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  16. Valentina Meliciani & Maria Savona, 2011. "The Determinants of Regional Specialisation in Business Services: Agglomeration Economies, Vertical Linkages and Innovation," SPRU Working Paper Series 193, SPRU - Science and Technology Policy Research, University of Sussex.

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