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The influence of international trade on labour productivity in services: The case of Brazil in the 1990s

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  • H. Stephen Gardner
  • Lourenço S. Paz
  • John Ssozi

Abstract

In the developing world, services account for a rising share of domestic employment and international trade. Thus, it is important to know whether trade liberalization contributes to labour productivity in services. We explore this question, examining the 1990–2000 Brazilian trade liberalization. We find that growth of imports and exports strengthened labour productivity in services, but the contribution was smaller in subsectors with more college graduates, and this negative offset was larger in subsectors that received large foreign direct investment (FDI) inflows. Improved access to imported manufactured intermediate inputs raised downstream services' labour productivity and downstream manufacturing firms benefitting from tariff cuts enacted by trade partners generated spillovers that improved the labour productivity of upstream service subsectors. However, FDI inflows and investments in human and physical capital modified these downstream factors. We conclude that the Brazilian trade liberalization strengthened productivity in services, but unequally across subsectors.

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  • H. Stephen Gardner & Lourenço S. Paz & John Ssozi, 2023. "The influence of international trade on labour productivity in services: The case of Brazil in the 1990s," Review of Development Economics, Wiley Blackwell, vol. 27(1), pages 268-290, February.
    • Handle: RePEc:bla:rdevec:v:27:y:2023:i:1:p:268-290
    DOI: 10.1111/rode.12936
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