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Trade in Services and TFP: The Role of Regulation

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  • Erik van der Marel

Abstract

What determines services TFP: Is it services trade or services‐trade regulation? To respond to this question I use four indicators of international trade in services since 1990 to 2005 – namely FDI inward stock, services imports, domestic sales of foreign affiliates (FATS) and FDI inflows – to examine what type of services trade directly affects services TFP. Such analysis is done both for the level and growth rate of TFP in each of the 14 selected services sectors. Subsequently, we analyze what type of sector‐specific regulation with respect to each of the four indicators of services trade has played an inhibiting effect on both the level and growth of services TFP. Such analysis contrasts with former studies in which mainly factor inputs and economy‐wide regulatory variables are used to explain services TFP. We provide evidence that services trade has a direct effect on the level of services TFP, but this effect is inhibited as soon as the regulatory variables are included. As for services TFP growth, we find that neither trade nor entry barriers are robust determinants to explain cross‐country differences over time. Instead, regulation on operational procedures affecting the variables costs structure of the firm play a much more important role in explaining TFP growth between countries.
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Suggested Citation

  • Erik van der Marel, 2012. "Trade in Services and TFP: The Role of Regulation," The World Economy, Wiley Blackwell, vol. 35(11), pages 1530-1558, November.
    • Handle: RePEc:bla:worlde:v:35:y:2012:i:11:p:1530-1558
    DOI: twec.12004
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    Cited by:

    1. Bernard Hoekman, 2017. "Trade in services: Opening markets to create opportunities," WIDER Working Paper Series wp-2017-31, World Institute for Development Economic Research (UNU-WIDER).
    2. Lingchao Li & Shu Jiang & Yingtien Lin, 2025. "The Impact of the Digital Economy on Sustainable Fisheries: Insights from Green Total Factor Productivity in China’s Coastal Regions," Sustainability, MDPI, vol. 17(6), pages 1-22, March.
    3. Masayuki MORIKAWA, 2015. "Service Trade and Productivity: Firm-level evidence from Japan," Discussion papers 15030, Research Institute of Economy, Trade and Industry (RIETI).
    4. Mironov, Valeriy V. & Petronevich, Anna V., 2015. "Discovering the signs of Dutch disease in Russia," Resources Policy, Elsevier, vol. 46(P2), pages 97-112.
    5. Van Der Marel,Erik Leendert & Shepherd,Ben, 2020. "Trade Facilitation in Services : Concepts and Empirical Importance," Policy Research Working Paper Series 9234, The World Bank.
    6. ONOSE, Okpeku Lilian & Aras, Osman Nuri, 2021. "Does the Export-Led Growth Hypothesis Hold for Services Exports in Emerging Economies?," MPRA Paper 108350, University Library of Munich, Germany.
    7. Li, Hao & Han, Jian & Xu, Yayun, 2023. "The effect of the digital economy on services exports competitiveness and ternary margins," Telecommunications Policy, Elsevier, vol. 47(7).
    8. World Bank Group, 2014. "Cambodia Services Trade : Performance and Regulatory Framework Assessment," World Bank Publications - Reports 20759, The World Bank Group.
    9. Yusuke ADACHI & Hikaru OGAWA & Masafumi TSUBUKU, 2019. "Productivity Dynamics during Major Crises in Japan: A Quantile Approach," Discussion papers 19015, Research Institute of Economy, Trade and Industry (RIETI).
    10. Roy, Martin, 2017. "The contribution of services trade policies to connectivity in the context of aid for trade," WTO Staff Working Papers ERSD-2017-12, World Trade Organization (WTO), Economic Research and Statistics Division.
    11. Mironov, V.V. & Petronevich, A.V., 2015. "Discovering the signs of Dutch disease in Russia," BOFIT Discussion Papers 3/2015, Bank of Finland Institute for Emerging Economies (BOFIT).
    12. Bouraima Sawadogo & Constant Fouopi Djiogap & Idrissa Ouedraogo & Moukaila Mouzamilou Takpara, 2024. "An empirical assessment of the role of trade in services in export product diversification in Sub-Saharan Africa," Journal of Productivity Analysis, Springer, vol. 61(3), pages 229-257, June.
    13. Bernard Hoekman, 2017. "Trade in services: Opening markets to create opportunities," WIDER Working Paper Series 031, World Institute for Development Economic Research (UNU-WIDER).
    14. Pravakar Sahoo & Ranjan Kumar Dash, 2017. "What Drives India's Surge in Service Exports?," The World Economy, Wiley Blackwell, vol. 40(2), pages 439-461, February.
    15. Arti Grover Goswami & Sebastián Sáez, 2014. "Trade in services competitiveness: An assessment methodology," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 5(01), pages 1-31.
    16. World Bank, 2016. "Assessing the Impact of WTO Accession on Belarus," World Bank Publications - Reports 24698, The World Bank Group.
    17. World Bank, 2023. "Kenya Country Economic Memorandum," World Bank Publications - Reports 40115, The World Bank Group.
    18. Fiorini, Matteo & Hoekman, Bernard, 2018. "Services trade policy and sustainable development," World Development, Elsevier, vol. 112(C), pages 1-12.
    19. Miroudot, Sébastien & Sauvage, Jehan & Shepherd, Ben, 2012. "Trade costs and productivity in services sectors," Economics Letters, Elsevier, vol. 114(1), pages 36-38.
    20. Xiaoli Hao & Xinhui Wang & Haitao Wu & Yu Hao, 2023. "Path to sustainable development: Does digital economy matter in manufacturing green total factor productivity?," Sustainable Development, John Wiley & Sons, Ltd., vol. 31(1), pages 360-378, February.
    21. World Bank Group, 2015. "Low-Income Developing Countries and G-20 Trade and Investment Policy," World Bank Publications - Reports 22937, The World Bank Group.

    More about this item

    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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