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Services liberalization and GVC participation: New evidence for heterogeneous effects by income level and provisions

Woori Lee ()

No 08-2017, CTEI Working Papers series from Centre for Trade and Economic Integration, The Graduate Institute

Abstract: Participation in global value chains (GVCs) is a key element in the industrialization strategies of many developing nations. Many studies look at the determinants of GVC participation but most focus on domestic regulatory environments, the cost of doing business, and trade policy. This paper investigates the possibility that services also matter by empirically testing for a link between higher GVC participation and services liberalization. Using the gravity framework, I examine the impact of services trade agreements on gross trade and GVC-trade (backward and forward participation). I find that services trade agreements promote both, but especially GVC-trade, although the effects are heterogeneous: the impact is bigger for developing nation exporters. Moreover, I find that services agreements that allow the export of services without local presence (non-establishment rights) are particularly important in fostering GVC participation.

Keywords: Services liberalization; Global value chains; Regional trade agreements; Gravity equation; Non-establishment rights (search for similar items in EconPapers)
JEL-codes: F13 F14 F15 F63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2017-10-26
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