Trade and direct investment in producer services and the domestic market for expertise

James Markusen, Thomas Rutherford () and David Tarr

Canadian Journal of Economics, 2005, vol. 38, issue 3, 758-777

Abstract: Foreign producer services can provide substantial benefits for domestic firms. We build on earlier monopolistic-competition models of intermediate producer services in this paper. Results show that: (1) while foreign services are partial-equilibrium substitutes for domestic skilled labour, they may be general-equilibrium complements, (2) service trade can provide crucial missing inputs that reverse comparative advantage in final goods, (3) the `optimal' tax on imported services may be a subsidy, and (4) in our dynamic formulation, there may be earnings losses for immobile workers along a transition path that suggest potentially important equity consequences of reform.

JEL-codes: F12 F16 F23 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (104)

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Working Paper: Trade and Direct Investment in Producer Services and the Domestic Market for Expertise (2002)
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