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Determinants of Comparative Advantage in Services

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  • Erik van der Marel
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    Abstract

    This paper analyzes whether and to what extent determinants of comparative advantage have explanatory power for conventional services trade. It assesses the geographical, Heckscher-Ohlin and institutional determinants of services trade based on the literature for goods trade. Moreover, this paper investigates the importance of a country’s governance of regulation as a source of comparative advantage in services markets. Determinants for services trade differ from goods. Services trade is more sensitive to a country’s stock of high-skilled and mid-skilled labour, more receptive to the level of trust enjoyed by any importers, and more dependant on the quality of regulatory governance practiced when liberalizing services sectors. The counterfactual analyses presented in this paper show furthermore that these factors when affected by policy can bring substantial gains to countries. Specifically, countries with already good regulatory governance structures would enjoy relatively higher growth share in services trade by capitalizing on their highskilled stock. Other countries, however, would instead to better by improving their condition of regulatory governance.

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    Bibliographic Info

    Paper provided by FIW in its series FIW Working Paper series with number 087.

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    Length: 49
    Date of creation: May 2012
    Date of revision:
    Handle: RePEc:wsr:wpaper:y:2012:i:087

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    Related research

    Keywords: Trade in services; Comparative advantage; Institutions; Regulation integration;

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    1. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, MIT Press, vol. 123(2), pages 441-487, 05.
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    12. Davin Chor, 2008. "Unpacking Sources of Comparative Advantage: A Quantitative Approach," Working Papers 13-2008, Singapore Management University, School of Economics.
    13. Fukunari Kimura & Hyun-Hoon Lee, 2006. "The Gravity Equation in International Trade in Services," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(1), pages 92-121, April.
    14. Miroudot, Sébastien & Sauvage, Jehan & Shepherd, Ben, 2010. "Measuring the Cost of International Trade in Services," MPRA Paper 27655, University Library of Munich, Germany.
    15. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 791-819.
    16. Shingal, ANIRUDH, 2009. "How much do agreements matter for services trade?," MPRA Paper 32815, University Library of Munich, Germany, revised 15 May 2010.
    17. Keith Walsh, 2006. "Trade in Services: Does Gravity Hold? A Gravity Model Approach to Estimating Barriers to Services Trade," The Institute for International Integration Studies Discussion Paper Series iiisdp183, IIIS.
    18. Arjan Lejour & J.W. de Paiva Verheijden, 2004. "Services trade within Canada and the European Union; what do they have in common?," CPB Discussion Paper 42, CPB Netherlands Bureau for Economic Policy Analysis.
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    Cited by:
    1. Diaz-Lanchas, Jorge & Llano, Carlos & Zofío, José Luis, 2013. "Trade margins, transport cost thresholds and market areas: Municipal freight flows and urban hierarchy," Working Papers in Economic Theory 2013/10, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).

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