Trade and Innovation in Services: Evidence from a Developing Economy

27 Pages Posted: 26 Jul 2014

See all articles by Andrés Zahler

Andrés Zahler

Universidad Diego Portales

Leo Iacovone

World Bank; University of Sussex

Aaditya Mattoo

World Bank - Development Research Group (DECRG)

Date Written: July 2014

Abstract

Studies on innovation and international trade have traditionally focused on manufacturing because neither was seen as important for services. Moreover, the few existing studies on services focus only on industrial countries, even though in many developing countries services are already the largest sector in the economy and an important determinant of overall productivity growth. Using a recent firm‐level innovation survey for Chile to compare the manufacturing and ‘tradable’ services sector, this paper reveals some novel patterns. First, even though services firms have on average a much lower propensity to export than manufacturing firms, services exports are less dominated by large firms and tend to be more skill intensive than manufacturing exports. Second, services firms appear to be as innovative as – and in some cases more innovative than – manufacturing firms, in terms of both inputs and outputs of ‘technological’ innovative activity, even though services innovations more often take a ‘non‐technological’ form. Third, services exporters (like manufacturing exporters) tend to be significantly more innovative than non‐exporters, with a wider gap for innovations close to the global technological frontier. These findings suggest that the growing faith in services as a source of both trade and innovative dynamism may not be misplaced.

Suggested Citation

Zahler, Andres and Iacovone, Leonardo and Mattoo, Aaditya, Trade and Innovation in Services: Evidence from a Developing Economy (July 2014). The World Economy, Vol. 37, Issue 7, pp. 953-979, 2014. Available at SSRN: https://ssrn.com/abstract=2472495 or http://dx.doi.org/10.1111/twec.12117

Andres Zahler (Contact Author)

Universidad Diego Portales ( email )

Vergara 210
Santiago, Santiag
Chile

Leonardo Iacovone

World Bank ( email )

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HOME PAGE: http://www.worldbank.org

University of Sussex ( email )

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Aaditya Mattoo

World Bank - Development Research Group (DECRG) ( email )

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Washington, DC 20433
United States
202-458-8047 (Phone)
202-676-9810 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/amattoo

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