The paper
This paper connects the international costs of trading services with sectoral productivity. It extends to services the evidence that trade costs matter for how efficiently resources are used.
Research findings
- Services sectors facing lower international trade costs tend to have higher total factor productivity.
- A 10% reduction in measured trade costs is associated with roughly 0.5% higher productivity, an effect similar in magnitude to the goods-sector result.
Policy takeaways
- Consider services trade barriers as part of the productivity agenda, alongside their effects on trade volumes.
- Assess reforms through their implications for competition and resource allocation within services sectors.