Structure and performance of the service sector in transition economies1

This paper examines the performance of the service sector in the Eastern European transition economies during the 1997–2004 period. The performance of the service sector as a whole and of its sub‐sectors is very heterogeneous within the region. Service sub‐sectors that are information and communications technology producers or users and those using skilled labour more intensively exhibit the highest labour productivity growth. Our estimates show a positive and significant effect of liberalization on service labour productivity growth that is stronger for sub‐sectors that are more distant from the technological frontier. Service liberalization is also shown to have a positive effect on labour productivity levels and growth of downstream manufacturing industries.     

Services liberalization and productivity of manufacturing firms

Employing a unique database of Ukrainian firms in 2001–07, we use the external push for liberalization in the services sector as a source of exogenous variation to identify the effect of services liberalization on total factor productivity (TFP) of manufacturing firms. The results indicate that a standard deviation increase in services liberalization within a firm is associated with a 9.2 percent increase in TFP. The effect is stronger for firms with high productivity, bringing about a reallocation of resources within an industry. Industry‐level results show that the effect of reallocation on industry productivity is almost as strong as the within‐firm effect. The dynamic interaction of services liberalization and TFP through the investment channel reinforces the effect. The effect is robust to different estimation methods and to different sub‐samples of the data. In particular, it is more pronounced for domestic and small firms.     

Trade Liberalization and Firm Productivity: Evidence from Chinese Manufacturing Industries

This paper examines the impact of tariff reduction following China's World Trade Organization (WTO) entry on the productivity of Chinese manufacturing firms using a firm‐level panel database that comprises all of China's manufacturing firms with an annual turnover above 5 million yuan and that spans the period of 2000–2006. An instrumental variable estimator is used to account for the endogeneity of the tariff reduction. The results indicate that China's trade liberalization in the five years following its WTO entry has led to a 0.94% annual increase in total factor productivity for Chinese manufacturing firms. However, the overall productivity gain from the tariff reduction is a net result of a productivity depressing effect of output tariff reduction and a productivity enhancing effect of input tariff reduction. Both effects have diminished in magnitude over the years after China joined the WTO. Firm heterogeneity and turnover plays an important role in generating gains from trade liberalization. The surviving firms have managed to cope with and take advantage of lower tariffs. The extent to which the tariff reduction affects Chinese firms' productivity is also dependent on the ownership structure of the firms with foreign‐invested firms being the clear winner.     

The effect of communication and energy services reform on manufacturing firms’ innovation

Upstream services liberalization improves the efficiency and cost of communication and energy services, reducing the marginal costs of downstream manufacturing firms through input-output linkages. This study explores one possible mechanism behind this finding: innovation. I investigate the effects of communication and energy services reform in India in the mid-1990s on downstream manufacturing firms’ decisions to invest in R&D. The empirical analysis uses manufacturing-firm level data and regulation indicators in the communications and energy service sectors. The liberalization of services in India had a positive effect on manufacturing-firm innovation. These results are concentrated on firms in the middle of the initial productivity distribution. The main channel is the elimination of entry barriers into the communication sector.     

The influence of international trade on labour productivity in services: The case of Brazil in the 1990s

In the developing world, services account for a rising share of domestic employment and international trade. Thus, it is important to know whether trade liberalization contributes to labour productivity in services. We explore this question, examining the 1990–2000 Brazilian trade liberalization. We find that growth of imports and exports strengthened labour productivity in services, but the contribution was smaller in subsectors with more college graduates, and this negative offset was larger in subsectors that received large foreign direct investment (FDI) inflows. Improved access to imported manufactured intermediate inputs raised downstream services' labour productivity and downstream manufacturing firms benefitting from tariff cuts enacted by trade partners generated spillovers that improved the labour productivity of upstream service subsectors. However, FDI inflows and investments in human and physical capital modified these downstream factors. We conclude that the Brazilian trade liberalization strengthened productivity in services, but unequally across subsectors.     

Reassessing the productivity gains from trade liberalization

This paper reassesses the impact of trade liberalization on productivity. We build a new, unique database of effective tariff rates at the country‐industry level for a broad range of countries over the past two decades. We then explore both the direct effect of liberalization in the sector considered, as well as its indirect impact in downstream industries via input linkages. Our findings point to a dominant role of the indirect input market channel in fostering productivity gains. A 1 percentage point decline in input tariffs is estimated to increase total factor productivity by about 2 percent in the sector considered. For advanced economies, the implied potential productivity gains from fully eliminating remaining tariffs are estimated at around 1 percent, on average, which do not factor in the presumably larger gains from removing existing non‐tariff barriers. Finally, we find suggestive evidence of complementarities between trade and FDI liberalization in boosting productivity. This calls for a broad liberalization agenda that cuts across different areas.     

Foreign Plants and Industry Productivity: Evidence from Chile

This paper presents new evidence on foreign plants and their effects on a host industry. I test the predictions of a Melitz‐type model using a panel of domestic and foreign plants in the Chilean manufacturing sector. Foreign ownership is a strong predictor of plant productivity and size advantages. Moreover, productivity gains for a domestic incumbent are positively associated with foreign plants' presence in the same industry and region. I also find a positive correlation between foreign entry and exit of less productive domestic plants, but inconclusive evidence on the effects on productivity of new domestic plants.     

WTO accession,foreign bank entry,and the productivity of Chinese manufacturing firms

After China’s accession to the World Trade Organization (WTO) in December 2001, foreign banks are allowed to enter the Chinese banking market in phases. Using firm-level data from the National Bureau of Statistics of China which cover all state-owned and non state-owned manufacturing firms with sales over 5 million RMB, we examine the relationship between foreign bank entry and the industry-level productivity growth of China’s manufacturing sector. Our empirical results suggest that (a) on average, opening up a region for foreign bank entry has no impact on aggregate productivity growth, (b) however, industries more dependent on external finance grow faster after a region is opened up for foreign bank entry, and (c) these results are due to changes in technical efficiency rather than reallocation. Overall, this paper provides new evidence on the relationship between banking market structure and manufacturing productivity in a fast growing developing country.     

对我国服务业FDI影响因素的实证分析

在经济服务化的背景下,服务业已逐步取代制造业,成为世界外国直接投资结构中的主流.创造吸引国际服务业FDI的有利环境,从而实现对服务业国际产业转移的顺利承接对于促进我国服务业的进一步增长、结构优化升级具有着重要作用.针对我国服务业FDI主要的影响因素进行了实证分析,并给出了相应的政策性启示.     

International Technology Diffusion and the Growth of TFP in the Manufacturing Sector of Developing Economies

This paper evaluates various channels through which foreign technology diffuses to the manufacturing sector of developing economies. These economies undertake virtually no own R&D, so they rely on foreign technology to a much larger extent than developed economies. We investigate the direct effect of foreign R&D, as well as technology embodied in imports of intermediate and capital goods and foreign direct investment, on the growth of total factor productivity and value added in the manufacturing sector of 32 economies during 1965–92. We find that foreign R&D typically has the biggest positive impact on domestic productivity and value‐added growth. Imports of capital goods and foreign direct investment also play a similar role, but their effect is of smaller magnitude and is not always significant.     

FOREIGN ENTRY INTO U.S. SERVICE INDUSTRY BY TAKEOVERS AND THE CREATION OF NEW FIRMS

We study the relation between foreign entry in U.S. service sector industries and the revealed comparative advantage of the investing country using U.S. Bureau of Economic Analysis firm‐level data on all foreign takeovers and new foreign‐owned firms from 1998 to 2008. We find foreign acquisitions in the service sector are in industries of U.S. comparative advantage while new foreign firms are in industries of investing country's comparative advantage. This suggests that foreign acquisitions in the service sector are not directly related to foreign investors' competitiveness in the industry of investment. In contrast foreign investors in new service sector firms come from countries with a competitive edge in the industries of investment. We also find that foreign investors of new service sector firms are from Organization for Economic Co‐operation and Development (OECD) countries with a comparative disadvantage in royalties and trademarks. (JEL F21, F23, G34)     

Industrial labour productivities and tariffs in South Africa

The analysis of the effect of tariffs for labour productivity faces the challenge of tariff policy endogeneity. Tariff policy is designed to promote economic development and the industrial sector tariff structure may reflect characteristics of the industries protected. We seek to identify the effect of tariffs by taking advantage of multilateral tariff liberalization using reductions in industrial sector tariffs in other world regions as instruments for sectoral tariff reductions in South Africa. The data cover 28 manufacturing sectors over the period 1988–2003. We find that tariff reductions have stimulated labour productivity when instrumented by multilateral tariffs. The ordinary least‐squares estimates show downward bias and this confirms the endogeneity of tariffs. Investigation of channels of effects shows some support for the importance of competitive pressure and technology spillover from trade liberalization.     

North–South Trade Liberalization and Economic Welfare

We consider a general equilibrium model of a developing economy (the South) that opens to trade with a developed economy (the North). The southern economy is characterized by open urban unemployment and rural–urban migration, a competitive agricultural sector and a monopolistically competitive manufacturing sector. Hence, there is potential for both inter‐ and intra‐industry trade to arise on liberalization, in addition to distortionary effects of duality. Southern comparative advantage in agriculture may arise from the labor market distortion and the basis for intra‐industry trade is love for variety. We characterize various configurations of the trade pattern, and the resulting welfare consequences of opening to trade in this context. We illustrate a new mechanism under which in some circumstances it may be possible for trade liberalization to lower economic welfare in the South.     

可标准化服务行业对服务业发展的影响——基于两部门模型的分析

从理论上探讨了标准化促进服务业发展的内在机制。构建了两部门模型,分析了可标准化服务部门对服务业发展的影响。利用2003—2012年中国服务业的省际数据,运用面板模型对可标准化服务部门的溢出效应进行了估算,利用DEA方法对服务业各行业的全要素生产率进行了测算和分解。结果表明:可标准化服务部门要素的边际产出高于不可标准化服务部门,发展可标准化服务部门有利于服务业增长;可标准化服务行业对不可标准化服务行业的溢出效应为负,原因在于可标准化服务行业的全要素生产率较低,因此在当前发展阶段需要进一步对可标准化服务行业内部进行优化整合。     

Trade liberalization,firm entry,and income inequality

This paper examines the short‐ and long‐run effects of trade liberalization via tariff reductions on income inequality in an economy, which is characterized by an imperfectly competitive urban manufacturing sector and a perfectly competitive rural agricultural sector. Tariff reductions reduce domestic output in the importable urban manufacturing sector, leading to shifts of capital from the urban sector to the rural agricultural sector. This can narrow the wage gap between skilled and unskilled labor in the short run. However, the lowered capital cost attracts new firms, and subsequently excessive entry of firms, to the urban manufacturing sector. This firm entry effect can mitigate the favorable effect of tariff reductions on wage inequality in the long run. Empirical study confirms the findings.     

资源配置与中国非农部门全要素生产率* ——基于制造业和服务业之间资源错配的分析

近年来,经济学家与政策制定者之间逐渐达成共识：有限的资源未能得到优化配置是阻碍发展中经济体生产率水平提升的重要原因。本文以1993-2011年中国制造业和服务业分行业数据为研究样本,从经验层面上系统分析了制造业和服务业之间的资源错配对中国非农部门TFP的影响。本文研究发现：（1）相对于中国制造业TFP的持续改善,服务业的TFP则长期徘徊在低位,二者之间的资源错配程度在进入21世纪后明显加重,造成非农部门TFP近40%的损失;（2）21世纪以来,制造业和服务业间的资源错配绝大部分来源于装备制造业与生产性服务业之间的错配;（3）装备制造业和生产性服务业之间的资本错配普遍高于劳动力错配。本文的引申含义是,现阶段的产业政策目标主要应定位于促进制造业和服务业二者之间的协调发展。     

Does FDI Facilitate Domestic Entry? Evidence from the Czech Republic

This paper analyzes the impact of FDI on domestic firm entry and firm size distributions in the Czech Republic during 1994–2000. We find that larger foreign presence stimulates the entry of domestic firms within the same industry, indicating the existence of positive horizontal spillovers from FDI. We also find evidence of significant vertical entry spillovers—FDI in downstream (upstream) industries initiates entry in upstream (downstream) sectors. Our results also show that entry spillovers through vertical linkages are stronger than horizontal spillovers and that while service industries benefit from both horizontal and vertical spillovers, manufacturing industries do not experience significant positive entry spillovers of any kind. We also find that country of origin of FDI matters—horizontal spillovers are driven by FDI from the EU countries. The right skewness of the firm size distributions in industries without FDI further emphasizes an important role of FDI presence for overall industry dynamics.     

FOREIGN ENTRY LIBERALIZATION AND EXPORT QUALITY: EVIDENCE FROM CHINA

This paper examines the impact of foreign entry deregulation in China on the export price and quality of manufacturing firms through input–output linkage. We create a unique dataset describing the extent of regulatory control over foreign entry across approximately 900 industries covering all primary, manufacturing and services sectors. Results suggest foreign entry deregulation encourages firms to improve product quality and increase export prices. Deregulation in the manufacturing sectors has more impact on downstream export price and quality, compared with services sectors. Moreover, firms having larger imported inputs benefit more from foreign entry deregulation. These effects are robust to alternative specifications. (JEL F1, D2, O2)     

Growth and risk at the industry level: The real effects of financial liberalization

This paper analyzes the effects of financial liberalization on growth and volatility at the industry level in a large sample of countries. We estimate the impact of liberalization on production, employment, firm entry, capital accumulation, and productivity. In order to overcome omitted variables concerns, we employ a number of alternative difference-in-differences estimation strategies. We implement a propensity score matching algorithm to find a control group for each liberalizing country. In addition, we exploit variation in industry characteristics to obtain an alternative set of difference-in-differences estimates. Financial liberalization is found to have a positive effect on both growth and volatility of production across industries. The positive growth effect comes from increased entry of firms, higher capital accumulation, and an expansion in total employment. By contrast, we do not detect any effect of financial liberalization on measured productivity. Finally, the growth effects of liberalization appear temporary rather than permanent.     

Intra‐industry Trade Liberalization: Why Skilled Workers are More Likely to Support Free Trade

This paper presents a theoretical model and empirical analysis that connects the prevalence of intra‐industry trade with increased wage inequality from trade liberalization in both skilled and unskilled labor abundant countries. The Stolper–Samuelson effect is incorporated into an intra‐industry trade liberalization (intra‐ITL) hypothesis where skilled labor opposes protectionism in all countries engaged in intra‐industry trade because skilled workers gain at the expense of unskilled workers from multilateral trade liberalization within the skill‐intensive sector. We examine empirical evidence on whether skilled individuals are more supportive of trade liberalization than unskilled individuals across 31 countries with different levels of intra‐industry trade and skill endowments. We find that the extent to which countries engage in intra‐industry trade in high‐tech commodities is strongly linked with the intensity of opposition to protection by skilled labor. Regression results strongly support our hypothesis that skilled workers, almost everywhere, are more likely to support free trade.