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Complementarity of Inputs across Countries in Services Trade

Carolina Lennon, Daniel Mirza () and Giuseppe Nicoletti ()

Annals of Economics and Statistics, 2009, issue 93-94, 161-182

Abstract: This article argues that trade in certain services has a specific feature that does not necessarily apply to goods. In those services, the production process ends in the country where they are eventually consumed (i.e. in the importing country). Hence, we propose that services trade must use interactively inputs from both exporting and importing countries and thus, should be affected in the same manner by their respective costs. We test our analytical framework using a macro dataset on bilateral trade in services and a specific industry dataset on Air passenger international transportation. We find results consistent with our theoretical framework: policy and non-policy factors affecting the use of inputs in both the exporting and the importing country have a symmetric impact on the bilateral flow of services between those countries.

Date: 2009
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Working Paper: Complementarity of Inputs across Countries in Services Trade (2009)
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