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What determines services TFP growth: services trade or services-trade regulation?

van der Marel, Erik (2010) What determines services TFP growth: services trade or services-trade regulation? Working paper, 168. Forum for Research in Empirical International Trade.

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Abstract

What determines services TFP growth: Is it services trade or services-trade regulation? To respond to this question I use four indicators of international trade in services since 1990 – namely FDI inward stock, services imports, domestic sales of foreign affiliates (FATS) and FDI inflows – to examine what type of services trade directly affects TFP growth. Subsequently, I analyze what type of traderelated regulation with respect to what type of services trade has played an inhibiting effect on services TFP growth. Such analysis contrasts with former studies in which mainly factor intensities are used to explain TFP growth. To find out what determines services TFP growth is important as some personal services such as health and education demonstrate a clear productivity lag, which according to the Baumol theory could eventually slow down real economic growth. I find that not trade but regulation forms a significant determinant for services TFP growth and that this effect is more pronounced for services sectors that are more distant from the technology frontier. Contrary to these findings, restrictions that are targeted to Mode 3 trade, i.e. FDI, seem to have a larger effect for services sectors that are closer to the technology frontier – presumably because spill-over effects from high-skilled labor are hindered to create higher TFP growth.

Item Type: Monograph (Working Paper)
Official URL: http://www.freit.org/WorkingPapers/
Additional Information: © 2010 The Author
Library of Congress subject classification: H Social Sciences > HF Commerce
Sets: Departments > International Relations
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Identification Number: 168
Date Deposited: 20 Oct 2011 10:59
URL: http://eprints.lse.ac.uk/38992/

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