Services Trade Restrictiveness and Manufacturing Productivity: The Role of Institutions
42 Pages Posted: 10 Sep 2015
Date Written: September 2015
We study the effect of services trade restrictiveness on manufacturing productivity for a broad cross-section of countries at different stages of economic development. Decreasing services trade restrictiveness has a positive indirect impact on the manufacturing sectors that use services as intermediate inputs in production. We identify a critical role of local institutions in shaping this effect: countries with high institutional capacity benefit the most from services trade policy reforms in terms of increased productivity in downstream industries. We argue that this reflects the characteristics of many services and services trade and provide a theoretical framework to formalize our suggested mechanisms.
Keywords: services trade; institutions; productivity
JEL Classification: F14; F15; F61; F63
Suggested Citation: Suggested Citation