Services trade restrictiveness and manufacturing export sophistication

Xiaoyan Su, Sajid Anwar, Ying Zhou and Xuan Tang

The North American Journal of Economics and Finance, 2020, vol. 51, issue C

Abstract: This paper highlights the importance of services trade liberalization. It is well-known that there is a strong relationship between the level of economic development of a country and the quality of its export basket. Since the pioneering work of Hausmann, Hwang, and Rodrik (2007), several studies have attempted to identify the determinants of export sophistication. In this paper, based on the existing literature, we argue that restrictiveness of services sector trade can have a negative impact on the level of export sophistication. Using panel data from 36 countries over the 2005–2014 period, we show that the impact of services sector trade restrictiveness on export sophistication is negative and statistically significant. We find that this negative effect has increased in the post-2007 period. Furthermore, restrictiveness of trade in modern services is relatively more detrimental to manufacturing export sophistication. A series of endogeneity and robustness tests confirm the reliability of our main empirical result. Our analysis suggests that services sector trade liberalization can also be used as a development strategy by developing countries.

Keywords: Services trade; Export sophistication; Manufacturing sector; Trade restrictiveness; Panel data analysis (search for similar items in EconPapers)
JEL-codes: F13 F14 F15 F43 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:51:y:2020:i:c:s1062940819300269

DOI: 10.1016/j.najef.2019.101058

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