Working Paper: CEPR ID: DP10834
Authors: Cosimo Beverelli; Matteo Fiorini; Bernard Hoekman
Abstract: We study the effect of services trade restrictiveness on manufacturing productivity for a broad cross-section of countries at different stages of economic development. Decreasing services trade restrictiveness has a positive indirect impact on the manufacturing sectors that use services as intermediate inputs in production. We identify a critical role of local institutions in shaping this effect: countries with high institutional capacity benefit the most from services trade policy reforms in terms of increased productivity in downstream industries. We argue that this reflects the characteristics of many services and services trade and provide a theoretical framework to formalize our suggested mechanisms.
Keywords: institutions; productivity; services; trade policy
JEL Codes: F14; F15; F61; F63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| services trade restrictiveness (F14) | manufacturing productivity (L23) |
| institutional capacity (O17) | services trade restrictiveness and manufacturing productivity (O14) |
| lower services trade restrictiveness (F14) | higher downstream manufacturing productivity (L23) |
| high institutional capacity (O43) | greater productivity gains from services trade policy reforms (O24) |
| services trade restrictiveness (F14) | productivity gains in countries with robust institutions (O43) |
| services trade restrictiveness (F14) | productivity gains in countries with low institutional quality (O43) |
| institutional quality (L15) | economic benefits from services trade liberalization (F19) |
| services trade restrictiveness and institutional capacity (O24) | downstream manufacturing productivity (L23) |