Services Policy Reform and Manufacturing Employment: Evidence from Transition Economies
37 Pages Posted: 2 Dec 2016
Date Written: September 2016
The performance of services sectors can have significant impacts on industries that use services as intermediate inputs. In this paper we complement the literature analyzing the productivity effects of services trade policies by investigating the relationship between services policy reforms and employment in manufacturing industries. Using a panel of sector-level data for 24 transition economies for the 1990-2012 period, we find find that moving towards best practice services policies is associated with an economically significant reduction of manufacturing employment. This negative effect is mitigated or disappears for countries with high levels of economic governance and human capital. The decline in manufacturing employment is observed only in the first decade of transition, with the major driver being reforms in the utilities sector. The estimated negative effect of policy reforms is of a contemporaneous nature; it does not persist along the lag structure.
Keywords: services policy; employment; transition economies
JEL Classification: F16; F66; J23; P21
Suggested Citation: Suggested Citation