Trade Reform in Services: Structural Change and Production Networks

Adam Jakubik and Wentao Zhou

No 2025/061, IMF Working Papers from International Monetary Fund

Abstract: We study the effects of services trade reforms in a multi-country multi-sector quantitative trade model with input-output linkages. We find that (i) welfare gains from substantial services trade liberalization are large, around 3 percent on average; (ii) gains are larger by 0.7 percentage points in a hypothetical scenario where EMDEs’ consumption patterns have converged to AEs, and by 5.7 percentage points when their production networks have converged; (iii) both EMDEs and AEs gain from EMDEs reducing services barriers to the level of AEs. Services-intensive AEs with strong supply linkages to EMDEs benefit the most. Our results are important to illustrate the increasing gains from services trade as EMDEs continue on their development trajectory, and therefore call for injecting further ambition into multilateral negotiations on services trade reforms.

Keywords: Structural Transformation; Services Trade; Trade Model; consumption pattern; welfare gain; EMDEs benefit; input share; service trade liberalization; iceberg trade cost; Trade in services; Income; Consumption; Household consumption; Global (search for similar items in EconPapers)
Pages: 28
Date: 2025-03-28
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