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Trade in Services and Trade in Goods: Differences and Complementarities

  • Carolina Lennon

    (The Vienna Institute for International Economic Studies, wiiw)

The purpose of this paper is twofold. First, we explore empirically to what extent the determinants of trade in services differ from those of trade in goods. Second, by the use of instrumental variables, we explore potential complementarities between bilateral trade in goods and bilateral trade in services. Using a gravity framework, the main results show that bilateral trust and contract enforcement environment, networks, labour market regulations and variables denoting technology of communication have a higher impact on services trade than on goods trade. Finally, after using instrumental variables, we find that bilateral trade in goods explains bilateral trade in services the resulting estimated elasticity is close to 1. Reciprocally, bilateral trade in services also affects bilateral trade in goods, though to a lesser extent we find an estimated (positive) elasticity of 0.46.

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File URL: http://www.wiiw.ac.at/trade-in-services-and-trade-in-goods-differences-and-complementarities-dlp-1897.pdf
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Paper provided by The Vienna Institute for International Economic Studies, wiiw in its series wiiw Working Papers with number 53.

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Length: 28 pages including 11 Tables and 3 Figures
Date of creation: Apr 2009
Date of revision:
Publication status: Published as wiiw Working Paper
Handle: RePEc:wii:wpaper:53
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  1. Mary Amiti & Shang-Jin Wei, 2004. "Fear of Service Outsourcing; Is it Justified?," IMF Working Papers 04/186, International Monetary Fund.
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