Trade in Business Services in General Equilibrium

32 Pages Posted: 2 Aug 2007

See all articles by James R. Markusen

James R. Markusen

University of Colorado at Boulder - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Bridget Strand

University of Colorado at Boulder - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: February 2007

Abstract

Trade in business services has been attracting attention from academic researchers, policy makers, and business journalists. While there are many anecdotes, there has been little in the way of formal theory applied to this issue. In this paper, we adapt a general model of fragmentation of production activities to try to capture the specific features of business services. Following a general discussion, we calibrate a numerical general-equilibrium simulation model to a situation in which both trade and foreign investment in services are initially banned to technically infeasible. We then compute three counter-factual scenarios: one in which trade but not investment in services is feasible or allowed, one in which investment but not trade is allowed, and one in which both trade and investment in services are allowed.

Keywords: Business services, foreign investment in services, fragmentation, offshoring, outsourcing, trade in services

JEL Classification: F0, F23

Suggested Citation

Markusen, James R. and Strand, Bridget, Trade in Business Services in General Equilibrium (February 2007). CEPR Discussion Paper No. 6080. Available at SSRN: https://ssrn.com/abstract=1004561

James R. Markusen (Contact Author)

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-492-0748 (Phone)
303-492-8960 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Bridget Strand

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States

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