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Providing Services to Boost Goods Exports: Theory and Evidence

Author

Listed:
  • Andrea Ariu
  • Florian Mayneris
  • Mathieu Parenti

Abstract

Goods and services have been generally analyzed as two different items in the consumer portfolio supplied by firms in separate industries. In this paper, we challenge this view by providing evidence on interactions within the firm between foreign sales of goods and services. We show empirically and theoretically that demand complementarities between both activities enable firms that export goods and services - we call them bi-exporters - to boost their manufacturing exports by also providing services. The provision of services thus participates to the perceived vertical differentiation of the goods. Under monopolistic competition, adding a service boosts firms' sales only through quantities. Accounting for large oligopolistic firms uncovers instead a different channel: bi-exporting may increase firms' market power that translates into higher prices. Our IV estimates show the price channel to be important. These results imply that ignoring such complementarities will lead to a mis-quantification of the welfare and business consequences of economic integration.

Suggested Citation

  • Andrea Ariu & Florian Mayneris & Mathieu Parenti, 2016. "Providing Services to Boost Goods Exports: Theory and Evidence," Working Papers ECARES ECARES 2016-43, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:eca:wpaper:2013/243160
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    References listed on IDEAS

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    Cited by:

    1. Dhingra, Swati & Freeman, Rebecca & Mavroeidi, Eleonora, 2018. "Beyond tariff reductions: what extra boost from trade agreement provisions?," LSE Research Online Documents on Economics 88683, London School of Economics and Political Science, LSE Library.
    2. Swati Dhingra & Rebecca Freeman & Eleonora Mavroeidi, 2018. "Beyond Tariff Reductions: What Extra Boost From Trade Agreement Provisions?," CEP Discussion Papers dp1532, Centre for Economic Performance, LSE.

    More about this item

    Keywords

    Global Value Chains; Service and Goods Trade;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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