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Producer Services, Manufacturing Linkages, and Trade

Author

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  • Joseph Francois

    (Erasmus Universiteit Rotterdam, Joh. Kepler University (Linz), and CEPR (London))

  • Julia Woerz

    (The Vienna Institute for International Economic Studies (WIIW))

Abstract

Working with a mix of panel data on goods and services trade for the OECD for 1994-2004, combined with social accounts data (i.e. data on intermediate linkages) for 78 countries benchmarked to the panel midpoint, we examine the role of services as inputs in manufacturing, with a particular focus on indirect exports of services through merchandise exports, and also on the related interaction between service sector openness and the overall pattern of manufacturing exports. From the cross-section, we also develop a set of stylized facts linking services to level of development and the density of intermediate linkages. We find significant and strong positive effects from increased business service openness (i.e. greater levels of imports) on industries like machinery, motor vehicles, chemicals and electric equipment, supporting the notion that off-shoring of business services may promote the competitiveness of the most skill and technology intensive industries in the OECD. Conversely, we find evidence of negative general equilibrium effects for sectors that are less service intensive.

Suggested Citation

  • Joseph Francois & Julia Woerz, 2007. "Producer Services, Manufacturing Linkages, and Trade," Tinbergen Institute Discussion Papers 07-045/2, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20070045
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    More about this item

    Keywords

    producer services; linkages; manufacturing exports; service imports; multiplier effects;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L8 - Industrial Organization - - Industry Studies: Services
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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