Service Trade, Regional Specialization, and Welfare
CAMA Working Paper 41/2023
64 Pages Posted: 27 Aug 2023
Date Written: August 2023
Abstract
How much does trade in services affect regional production specialization and welfare? Using unique Canadian trade data, we document that the size of inter-provincial service trade is comparable to that of good trade, and that net exports of services are highly correlated with the value-added share of tradable services across provinces. With a spatial model featuring domestic and international trade, we quantify the effects of service trade. Our results highlight that domestic service trade significantly promotes regional specialization, with heterogeneous welfare gains that reduce regional disparities. Conversely, international service trade generates more uniform welfare gains across provinces.
Keywords: service trade, domestic trade, regional specialization, regional disparities, welfare, structural transformation
JEL Classification: E20, F10, L16
Suggested Citation: Suggested Citation