What is so Special About Trade in Services?

University of Nottingham Research Paper No. 2004/02

31 Pages Posted: 5 Feb 2005

See all articles by Daniel Mirza

Daniel Mirza

University of Nottingham - School of Economics; Université de Rennes I; CEPII, Centre d'Etudes Prospectives et d'Info. Internationales

Giuseppe Nicoletti

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)

Date Written: February 2004

Abstract

This article argues that trade in services has a specific feature that does not apply to trade in goods. As the traded service is partly produced where it is consumed (i.e. in the importing country), we propose that it must use interactively inputs from both the exporting and importing countries. The modelling of the specificity of traded services is inspired from the O-ring production function presented in Kremer (1993). We then test our analytical framework using a new OECD dataset on bilateral trade in services. We find that policy and non-policy factors affecting the use of inputs in the exporting or importing country indeed have a similar impact on the same flow of traded service between those countries. This finding may contribute to explain why bilateral commerce in tradable-services is typically weaker than bilateral trade in goods.

Keywords: Trade, Services

JEL Classification: F10, F20

Suggested Citation

Mirza, Daniel and Nicoletti, Giuseppe, What is so Special About Trade in Services? (February 2004). University of Nottingham Research Paper No. 2004/02, Available at SSRN: https://ssrn.com/abstract=660122 or http://dx.doi.org/10.2139/ssrn.660122

Daniel Mirza (Contact Author)

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Université de Rennes I ( email )

11 Rue Jean Macé
35065 Rennes Cedex, Rennes
France

CEPII, Centre d'Etudes Prospectives et d'Info. Internationales

9 Rue Georges Pitard
Paris Cedex 15, F-75015
France

Giuseppe Nicoletti

Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO) ( email )

2 rue Andre Pascal
Paris Cedex 16, MO 63108
France
+33 1 4524 8730 (Phone)
+33 1 4524 1347 (Fax)

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