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Services Policies and Manufacturing Exports

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  • Ben Shepherd

Abstract

This paper uses a structural gravity model to show the effects of services policies on manufacturing exports. Whereas the previous literature has focused on indirect effects of policies—flowing through productivity effects in domestic services markets—the paper looks at direct effects, namely the ability of domestic manufacturers to access services inputs on world markets at competitive prices. The results show that discriminatory barriers to services trade have a significant negative effect on manufacturing exports. It uses theory-consistent counterfactual simulations to show that the trade and real output effects of a 10% reduction in services trade restrictiveness are in fact much larger than those of a 10% reduction in tariffs. On a policy level, the results suggest that an additional argument for liberalizing services markets is that it in fact aids manufacturing sector development, due to the intimate links between the two.

Suggested Citation

  • Ben Shepherd, 2018. "Services Policies and Manufacturing Exports," Working Papers id:12958, eSocialSciences.
    • Handle: RePEc:ess:wpaper:id:12958
    Note: Institutional Papers
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    References listed on IDEAS

    as
    1. Miroudot, Sébastien & Sauvage, Jehan & Shepherd, Ben, 2012. "Trade costs and productivity in services sectors," Economics Letters, Elsevier, vol. 114(1), pages 36-38.
    2. Egger, Peter & Larch, Mario, 2008. "Interdependent preferential trade agreement memberships: An empirical analysis," Journal of International Economics, Elsevier, vol. 76(2), pages 384-399, December.
    3. Fally, Thibault, 2015. "Structural gravity and fixed effects," Journal of International Economics, Elsevier, vol. 97(1), pages 76-85.
    4. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    5. Aaditya Mattoo, 2003. "China's Accession to the WTO: The Services Dimension," Journal of International Economic Law, Oxford University Press, vol. 6(2), pages 299-339, June.
    6. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    7. Jean-François Arvis & Ben Shepherd, 2013. "The Poisson quasi-maximum likelihood estimator: a solution to the ‘adding up’ problem in gravity models," Applied Economics Letters, Taylor & Francis Journals, vol. 20(6), pages 515-519, April.
    8. James E. Anderson & Mario Larch & Yoto V. Yotov, 2015. "Estimating General Equilibrium Trade Policy Effects: GE PPML," CESifo Working Paper Series 5592, CESifo.
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    Cited by:

    1. Sonia Pant & Debashis Chakraborty, 2024. "How Service Inputs Influence Export Dynamics? Experience of Manufacturing Firms from Developing Countries," Working Papers 2475, Indian Institute of Foreign Trade.

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