The role of services in globalisation

Timon Bohn,Erik Dietzenbacher,Steven Brakman

doi:10.1111/twec.12640

Timon Bohn, Erik Dietzenbacher + Show 1 more

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https://doi.org/10.1111/twec.12640

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Journal: The World Economy	Publication Date: Mar 26, 2018
Citations: 14	License type: CC BY 4.0

Affiliation: University of Groningen

Abstract

AbstractThis paper explores the role of services in international trade and global value chains, and adds to our knowledge on recent trends in globalisation. We employ indicators for trade in value‐added (VA) and for gross exports, and address the following two questions: (i) has trade of VA in services (i.e., the VA created by domestic service industries and embodied in foreign consumption of final products) grown more than trade of VA in manufacturing; and (ii) does trade of VA in services travel further than trade of VA in manufacturing. Based on the World Input‐Output Database (WIOD), we find, in general, that for the period 2000–14, the share of services in exports of VA grew over time, whilst the share of manufacturing remained constant (or grew relatively less). Second, throughout the entire period, services had a larger share in interregional exports of VA than in intraregional exports of VA, whilst the opposite was true for manufacturing. Services were thus more global than manufacturing.

Highlights

Empirical trade research is focused on manufactured goods despite the rapid growth of services trade (Feenstra, 2016)
Is this trend reflected in a rising importance of trade in services relative to trade in manufactured goods over time? Second, assuming relatively low transport barriers related to services, trade in services could be more important in interregional trade than in intraregional trade
Do services, which we define in a broad sense to include both embedded services and direct services exports, travel further than manufactured goods? These questions follow Low’s (2013) call for more analytical research on the characteristics of services in global value chains

Summary

| INTRODUCTION

Empirical trade research is focused on manufactured goods despite the rapid growth of services trade (Feenstra, 2016). Manufacturing industries that are involved in trade—especially those involved in the production of elaborately transformed and high-value-added goods—depend on domestic services (Drake-Brockman & Stephenson, 2012) This implies that there are more services being traded than what is suggested by gross export statistics. Restrictions on direct services trade have an effect on embedded services because exported goods may depend on services inputs that need to be imported This would suggest that value-added created by service industries may not travel further than value-added created by manufacturing industries. This method separates foreign value-added embodied in a country’s exports from domestic value-added— solving double-counting Both demand-side and supply-side approaches are consistent in that they lead to similar total trade figures on the global level (Escaith, 2014b). The mn 9 mn matrix D of intermediate deliveries, the mn 9 m matrix F of final demands, the mn-element output vector z, and the mn-element value-added vector v are (in partitioned form) given by

D11 Á Á Á D1r Á Á Á D1s Á Á Á D1m 3

L11 Á Á Á L1r Á Á Á L1s Á Á Á L1m 3

| EMPIRICAL RESULTS

| CONCLUSION AND DISCUSSION