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Comparative Advantages in U. S. Bilateral Services Trade with China and India


  • Lirong Liu


  • Hiranya K. Nath


  • Kiril Tochkov



Using bilateral trade data for 16 service categories, this paper examines the patterns, evolution, and determinants of comparative advantage (CA) in U.S. services trade with China and India from 1992 to 2010. The results indicate that the U.S. has a CA in most services, except in more traditional ones, such as travel and transportation. However, India, and more recently China, gained a CA in modern services, such as computer and information services during the period considered in this paper. An examination of the distributional dynamics indicates that the likelihood of U.S. gaining CA over an initial position of comparative disadvantage (CDA) in its trade of a particular service with India is higher than the probability of losing its initial dominance. In contrast, the U.S. CA or CDA vis-??-vis China exhibits high levels of persistence over time. The regression results suggest that relative abundance of sector-specific labor, human capital, and FDI inflows have been significant sources of CA for the U.S. over both China and India.

Suggested Citation

  • Lirong Liu & Hiranya K. Nath & Kiril Tochkov, 2015. "Comparative Advantages in U. S. Bilateral Services Trade with China and India," William Davidson Institute Working Papers Series wp1092, William Davidson Institute at the University of Michigan.
  • Handle: RePEc:wdi:papers:2015-1092

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    1. Veena K. Pailwar & Nirav R. Shah, 2009. "Revealed comparative advantages for India in services trade," International Journal of Trade and Global Markets, Inderscience Enterprises Ltd, vol. 2(2), pages 109-127.
    2. Abhijit Das & Rashmi Banga & Dinesh Kumar, 2011. "Global Economic Crisis : Impact and Restructuring of the Services Sector in India," Trade Working Papers 23225, East Asian Bureau of Economic Research.
    3. Ranjan Dash & P. Parida, 2013. "FDI, services trade and economic growth in India: empirical evidence on causal links," Empirical Economics, Springer, vol. 45(1), pages 217-238, August.
    4. Arnaud Costinot & Dave Donaldson & Ivana Komunjer, 2012. "What Goods Do Countries Trade? A Quantitative Exploration of Ricardo's Ideas," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 581-608.
    5. Runjuan Liu & Daniel Trefler, 2008. "Much Ado About Nothing: American Jobs and the Rise of Service Outsourcing to China and India," NBER Working Papers 14061, National Bureau of Economic Research, Inc.
    6. Yanrui Wu, 2007. "Service Sector Growth in China and India: A Comparison," Economics Discussion / Working Papers 07-04, The University of Western Australia, Department of Economics.
    7. Uday M. Apte & Hiranya K. Nath, 2012. "U.S. Trade In Information-Intensive Services," World Scientific Book Chapters,in: The UCLA Anderson Business and Information Technologies (BIT) Project A Global Study of Business Practice (2012), chapter 6, pages 117-144 World Scientific Publishing Co. Pte. Ltd..
    8. Ranjan Kumar Dash & Purna Chandra Parida, 2012. "Services trade and economic growth in India: an analysis in the post-reform period," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 4(3), pages 326-345.
    9. Amita Batra & Zeba Khan, 2005. "Revealed comparative advantage: An analysis for India and China," Indian Council for Research on International Economic Relations, New Delhi Working Papers 168, Indian Council for Research on International Economic Relations, New Delhi, India.
    10. Bent Dalum & Keld Laursen & Gert Villumsen, 1998. "Structural Change in OECD Export Specialisation Patterns: de-specialisation and 'stickiness'," International Review of Applied Economics, Taylor & Francis Journals, vol. 12(3), pages 423-443.
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    1. repec:ags:aolpei:276072 is not listed on IDEAS
    2. repec:spr:eurase:v:8:y:2018:i:2:d:10.1007_s40822-018-0098-0 is not listed on IDEAS

    More about this item


    Services Trade; Comparative Advantage; China; India;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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