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Comparative Advantages in U. S. Bilateral Services Trade with China and India

Lirong Liu (), Hiranya Nath () and Kiril Tochkov ()
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Lirong Liu: Department of Economics, Sam Houston State University

No 1501, Working Papers from Sam Houston State University, Department of Economics and International Business

Abstract: Using bilateral trade data for 16 service categories, this paper examines the patterns, evolution, and determinants of comparative advantage (CA) in U.S. services trade with China and India from 1992 to 2010. The results indicate that the U.S. has a CA in most services, except in more traditional ones, such as travel and transportation. However, India, and more recently China, gained a CA in modern services, such as computer and information services during the period considered in this paper. An examination of the distributional dynamics indicates that the likelihood of U.S. gaining CA over an initial position of comparative disadvantage (CDA) in its trade of a particular service with India is higher than the probability of losing its initial dominance. In contrast, the U.S. CA or CDA vis-à-vis China exhibits high levels of persistence over time. The regression results suggest that relative abundance of sector-specific labor, human capital, and FDI inflows have been significant sources of CA for the U.S. over both China and India.

Date: 2015-04
New Economics Papers: this item is included in nep-cna and nep-int
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Journal Article: Comparative advantages in U.S. bilateral services trade with China and India (2015) Downloads
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