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Trade and direct investment in producer services and the domestic market for expertise

In: Trade Policies for Development and Transition

Author

Listed:
  • James Markusen
  • Thomas F. Rutherford
  • David Tarr

Abstract

Foreign producer services can provide substantial benefits for domestic firms. We build on earlier monopolistic-competition models of intermediate producer services in this paper. Results show that: (1) while foreign services are partial-equilibrium substitutes for domestic skilled labour, they may he general-equilibrium complements, (2) service trade can provide crucial missing inputs that reverse comparative advantage in final goods, (3) the ‘optimal’ tax on imported services may be a subsidy, and (4) in our dynamic formulation, there may be earnings losses for immobile workers along a transition path that suggest potentially important equity consequences of reform.

Suggested Citation

  • James Markusen & Thomas F. Rutherford & David Tarr, 2017. "Trade and direct investment in producer services and the domestic market for expertise," World Scientific Book Chapters,in: Trade Policies for Development and Transition, chapter 19, pages 439-458 World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813108448_0019
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    Keywords

    International Trade Policy; Developing Countries; Transition Countries; Growth; Poverty; Environment; Multilateral; Adjustment Costs; Autos and Steel;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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