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Trade in Services and TFP: The Role of Regulation

Listed author(s):
  • Erik van der Marel

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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File URL: http://hdl.handle.net/10.1111/twec.12004
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Article provided by Wiley Blackwell in its journal The World Economy.

Volume (Year): 35 (2012)
Issue (Month): 11 (November)
Pages: 1530-1558

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Handle: RePEc:bla:worlde:v:35:y:2012:i:11:p:1530-1558
DOI: twec.12004
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  1. Jack E. Triplett & Barry P. Bosworth, 2003. "Productivity measurement issues in services industries: "Baumol's disease" has been cured," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 23-33.
  2. Bernard Hoekman & Aaditya Mattoo & André Sapir, 2007. "The political economy of services trade liberalization: a case for international regulatory cooperation?," Oxford Review of Economic Policy, Oxford University Press, vol. 23(3), pages 367-391, Autumn.
  3. repec:dgr:rugccs:200311 is not listed on IDEAS
  4. Ark, Bart van & Inklaar, Robert & McGuckin, Robert H., 2003. "ICT and productivity in Europe and the United States," CCSO Working Papers 200311, University of Groningen, CCSO Centre for Economic Research.
  5. Ann E. Harrison & Brian J. Aitken, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June.
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