Producer Services, Manufacturing Linkages, and Trade

Tinbergen Institute Discussion Paper No. 07-045/2

45 Pages Posted: 18 Jun 2007

See all articles by Joseph F. Francois

Joseph F. Francois

University of Bern - Department of Economics; Centre for Economic Policy Research (CEPR); Vienna Institute of International Economic Studies (WIIW); University of Adelaide - School of Economics

Julia Woerz

Vienna Institute of International Economic Studies (WIIW); Tinbergen Institute Rotterdam (TIR)

Date Written: June 2007

Abstract

Working with a mix of panel data on goods and services trade for the OECD for 1994-2004, combined with social accounts data (i.e. data on intermediate linkages) for 78 countries benchmarked to the panel midpoint, we examine the role of services as inputs in manufacturing, with a particular focus on indirect exports of services through merchandise exports, and also on the related interaction between service sector openness and the overall pattern of manufacturing exports. From the cross-section, we also develop a set of stylized facts linking services to level of development and the density of intermediate linkages. We find significant and strong positive effects from increased business service openness (i.e. greater levels of imports) on industries like machinery, motor vehicles, chemicals and electric equipment, supporting the notion that off-shoring of business services may promote the competitiveness of the most skill and technology intensive industries in the OECD. Conversely, we find evidence of negative general equilibrium effects for sectors that are less service intensive.

Keywords: producer services, linkages, manufacturing exports, service imports, multiplier effects

JEL Classification: F14, L8, O11

Suggested Citation

Francois, Joseph F and Woerz, Julia, Producer Services, Manufacturing Linkages, and Trade (June 2007). Available at SSRN: https://ssrn.com/abstract=993361 or http://dx.doi.org/10.2139/ssrn.993361

Joseph F Francois (Contact Author)

University of Bern - Department of Economics ( email )

Schanzeneckstrasse 1
Bern, CH-3001
Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Vienna Institute of International Economic Studies (WIIW) ( email )

Oppolzergasse 6
A-1010 Vienna
Austria

University of Adelaide - School of Economics ( email )

Adelaide SA, 5005
Australia
+61 8 8303 5540 (Phone)
+61 8 8223 1460 (Fax)

Julia Woerz

Vienna Institute of International Economic Studies (WIIW) ( email )

A-1010 Vienna
Austria
+43 1 5336610 24 (Phone)
+43 1 5336610 50 (Fax)

HOME PAGE: http://www.wiiw.ac.at/e/staff_woerz.html

Tinbergen Institute Rotterdam (TIR)

P.O. Box 1738
3000 DR Rotterdam
Netherlands

HOME PAGE: http://www.tinbergen.nl/home.html

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