The Tradability of Services: Geographic Concentration and Trade Costs

55 Pages Posted: 28 Jun 2015

See all articles by Antoine Gervais

Antoine Gervais

University of Sherbrooke - Department of Economics

J. Bradford Jensen

Georgetown University - McDonough School of Business; Peterson Institute for International Economics

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Date Written: June 19, 2015

Abstract

In this paper, we use a unique dataset on the distribution of output and demand across regions of the United States to estimate trade costs for 969 service and manufacturing industries. Our estimation method is a natural extension of the gravity model of trade and identifies trade costs in the absence of trade data. The estimated trade costs are higher on average for service industries, but there is considerable variation across industries within sectors. Using the trade cost estimates, we classify industries into tradable and non-tradable categories. We find that accounting for tradable service industries nearly doubles the international exposure of the US economy, tradable services value added is unevenly distributed across geographical regions, labor productivity and wages are higher on average for tradable industries, and potential welfare gains from trade liberalization in the service sector are sizable.

Keywords: Service sector, international trade, trade costs, monopolistic competition

JEL Classification: F1

Suggested Citation

Gervais, Antoine and Jensen, J. Bradford, The Tradability of Services: Geographic Concentration and Trade Costs (June 19, 2015). Available at SSRN: https://ssrn.com/abstract=2623568 or http://dx.doi.org/10.2139/ssrn.2623568

Antoine Gervais (Contact Author)

University of Sherbrooke - Department of Economics ( email )

2500 bd de l'Universite
Sherbrooke, Québec J1K 2R1
Canada

J. Bradford Jensen

Georgetown University - McDonough School of Business ( email )

3700 O Street, NW
Washington, DC 20057
United States

Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

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