Does Service Trade Liberalization Promote Service Productivity? Evidence from China

Xin Fu, Tangyou Wang () and Hongxu Yang
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Xin Fu: Chinese Academy of International Trade and Economic Cooperation, Beijing 100710, China
Tangyou Wang: School of Finance, Central University of Finance and Economics, Beijing 100081, China
Hongxu Yang: School of International Trade and Economics, Central University of Finance and Economics, Beijing 100081, China

Sustainability, 2023, vol. 15, issue 8, 1-22

Abstract: This paper investigates the effects of service trade liberalization on service productivity. Based on a city-level database from 2006 to 2019, we estimate the labor productivity of the service industry and show the varying trends of productivity growth. Additionally, by exploiting the cross-city, cross-time variation at the time of China’s innovation pilot city policy of service trade liberalization, we employ a difference-in-difference strategy to estimate the effects. The empirical evidence suggests that liberalizing the service trade has a positive effect on service productivity. In addition, the evidence indicates that service trade liberalization could increase the productivity of the service industry in cities located in the eastern and central parts of China, as well as in those cities with a higher degree of marketization. The main influencing channels of service trade liberalization on productivity predominantly occur through the increase in technology spillover, market competition, and human capital. China’s evidence highlights the positive relationship between trade liberalization and productivity in the service industry and provides implications for realizing the sustainable development of services in developing countries; therefore, China and other developing countries are suggested to continuously formulate and deepen their service trade liberalization strategy.

Keywords: service trade liberalization; service productivity; innovation pilot city policy of service trade liberalization (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2023
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