The COVID-19 Shock and Services Trade: Explaining the Heterogeneous Decline

60 Pages Posted: 29 Nov 2021

See all articles by Anirudh Shingal

Anirudh Shingal

S.P. Jain Institute of Management & Research; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); University of Bern - World Trade Institute

Date Written: November 2, 2021

Abstract

Global services trade declined by 20% during 2020 with significant heterogeneity across countries, geographical regions and sectors. The decline was correlated with COVID-19-case incidence; stringency of imposed lockdowns; the decline in merchandise trade; and with different ways of transacting services trade across sectors. The latter depends on the sectoral composition of services trade across countries, which in turn emanates from more fundamental determinants of comparative advantage in services. Results from empirical analysis suggest that smaller, more capital- and PTA-intensive economies with more digital-trade-restrictive policies and lower ability to leverage ICT infrastructure were associated with relatively larger declines. Regulatory quality is found to have played both alleviating and intensifying roles in the decline, while geographical remoteness is found to be inversely related to it. Finally, the expected role of GVC-integration in accentuating the services trade decline finds strong support in both aggregate GMM and bilateral structural gravity results across sectors.

Keywords: Services trade; COVID-19; heterogeneity; modes of supply; structural determinants; gravity model

JEL Classification: F1, F14

Suggested Citation

Shingal, Anirudh, The COVID-19 Shock and Services Trade: Explaining the Heterogeneous Decline (November 2, 2021). Robert Schuman Centre for Advanced Studies Research Paper No. RSC 2021/85, Available at SSRN: https://ssrn.com/abstract=3972308 or http://dx.doi.org/10.2139/ssrn.3972308

Anirudh Shingal (Contact Author)

S.P. Jain Institute of Management & Research ( email )

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

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University of Bern - World Trade Institute ( email )

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