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Services Productivity, Trade Policy, and Manufacturing Exports

Listed author(s):
  • Bernard Hoekman
  • Benjamin Shepherd

This paper analyzes the linkage between services and manufacturing productivity performance, using firm-level data for over 100 developing countries. We find strong evidence for such a linkage, although the effect is small: at the average rate of services input intensity, a 10% improvement in services productivity is associated with an increase in manufacturing productivity 0.3%, and a resulting increase in exports of 0.2%. Services trade restrictiveness indices (STRI) are found to be a statistically significant determinant of manufactured exports performance, a finding that is robust to the inclusion of the overall level of trade restrictiveness that is applied against manufactured exports directly. The main channel through which services trade restrictions negatively affect manufactured exports is through FDI, a finding that is consistent with the stylized fact in the literature that FDI is a key channel for trade in services and an important vehicle through which services technology and know-how is transferred across countries. At the sectoral level, restrictions on transport and retail distribution services have the largest negative impact on exports of manufactures.

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File URL: http://cadmus.eui.eu/bitstream/handle/1814/34305/RSCAS_WP_%202015_07.pdf?sequence=1
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File URL: http://hdl.handle.net/1814/34305
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Paper provided by European University Institute in its series RSCAS Working Papers with number 2015/07.

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Date of creation: Jan 2015
Handle: RePEc:rsc:rsceui:2015/07
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  1. Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009. "Estimating Trade Restrictiveness Indices," Economic Journal, Royal Economic Society, vol. 119(534), pages 172-199, 01.
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  10. 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.
  11. Pinelopi Koujianou Goldberg & Amit Kumar Khandelwal & Nina Pavcnik & Petia Topalova, 2010. "Imported Intermediate Inputs and Domestic Product Growth: Evidence from India," The Quarterly Journal of Economics, Oxford University Press, vol. 125(4), pages 1727-1767.
  12. Joseph Francois & Bernard Hoekman, 2010. "Services Trade and Policy," Journal of Economic Literature, American Economic Association, vol. 48(3), pages 642-692, September.
  13. Jens Matthias Arnold & Beata Javorcik & Molly Lipscomb & Aaditya Mattoo, 2016. "Services Reform and Manufacturing Performance: Evidence from India," Economic Journal, Royal Economic Society, vol. 126(590), pages 1-39, 02.
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  15. Holger Breinlich & Anson Soderbery & Greg C. Wright, 2014. "From selling goods to selling services: firm responses to trade liberalization," LSE Research Online Documents on Economics 60523, London School of Economics and Political Science, LSE Library.
  16. Santos Silva, J.M.C. & Tenreyro, Silvana, 2011. "Further simulation evidence on the performance of the Poisson pseudo-maximum likelihood estimator," Economics Letters, Elsevier, vol. 112(2), pages 220-222, August.
  17. Matthieu Crozet & Emmanuel Milet, 2014. "The Servitization of French Manufacturing Firms," Working Papers 2014-10, CEPII research center.
  18. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2008. "Estimating Trade Flows: Trading Partners and Trading Volumes," The Quarterly Journal of Economics, Oxford University Press, vol. 123(2), pages 441-487.
  19. Peter Debaere & Holger Görg & Horst Raff, 2013. "Greasing the wheels of international commerce: how services facilitate firms' international sourcing," Canadian Journal of Economics, Canadian Economics Association, vol. 46(1), pages 78-102, February.
  20. Markus Kelle, 2012. "Crossing Industry Borders: German Manufacturers as Services Exporters," wiiw Working Papers 92, The Vienna Institute for International Economic Studies, wiiw.
  21. Ingo Borchert & Batshur Gootiiz & Aaditya Mattoo, 2014. "Policy Barriers to International Trade in Services: Evidence from a New Database," World Bank Economic Review, World Bank Group, vol. 28(1), pages 162-188.
  22. Duggan, Victor & Rahardja, Sjamsu & Varela, Gonzalo, 2013. "Service sector reform and manufacturing productivity : evidence from Indonesia," Policy Research Working Paper Series 6349, The World Bank.
  23. Markus Kelle, 2013. "Crossing Industry Borders: German Manufacturers as Services Exporters," The World Economy, Wiley Blackwell, vol. 36(12), pages 1494-1515, December.
  24. Daniel Saslavsky & Ben Shepherd, 2014. "Facilitating international production networks: The role of trade logistics," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 23(7), pages 979-999, October.
  25. Fernandes, Ana M. & Paunov, Caroline, 2012. "Foreign direct investment in services and manufacturing productivity: Evidence for Chile," Journal of Development Economics, Elsevier, vol. 97(2), pages 305-321.
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