Services Policy Reform and Manufacturing Employment: Evidence from Transition Economies

29 Pages Posted: 17 Sep 2018

See all articles by Matteo Fiorini

Matteo Fiorini

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS)

Bernard Hoekman

Robert Schuman Centre for Advanced Studies; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); Centre for Economic Policy Research (CEPR)

Clément Malgouyres

Paris School of Economics (PSE); Institut des politiques publiques (PSE)

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Date Written: September 2018

Abstract

Policy reforms targeting the services sectors are a neglected dimension of the process of structural transformation and economic development. The effects of such reforms on employment across industries as a function of their use of services as intermediate inputs are theoretically ambiguous and remain largely understudied. This paper uses sector‐level data for 24 transition economies for the 1990–2012 period to assess the impacts of services policy reforms on downstream manufacturing employment. We find a negative effect of services reforms on manufacturing sector employment. This is mostly associated with the process of transition to a market‐based economy. Controlling for transition‐specific dynamics, the data suggest a neutral effect of progress towards adopting “best practice” policies for upstream services on employment in downstream manufacturing. Furthermore, in line with the extant literature, we confirm that services policy reforms enhance productivity of downstream manufacturing industries. Finally, we find that the negative effects on downstream employment are mitigated in countries with better economic governance and human capital.

Keywords: employment, services policy, transition economies

Suggested Citation

Fiorini, Matteo and Hoekman, Bernard and Malgouyres, Clément, Services Policy Reform and Manufacturing Employment: Evidence from Transition Economies (September 2018). The World Economy, Vol. 41, Issue 9, pp. 2320-2348, 2018. Available at SSRN: https://ssrn.com/abstract=3245482 or http://dx.doi.org/10.1111/twec.12710

Matteo Fiorini (Contact Author)

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Bernard Hoekman

Robert Schuman Centre for Advanced Studies ( email )

Fiesole, Tuscany
Italy

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Clément Malgouyres

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Institut des politiques publiques (PSE) ( email )

48 boulevard Jourdan
Paris, 75014
France

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