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Empirical Methods in International Trade

Essays in Honor of Mordechai Kreinin

Edited by Michael G. Plummer

Internationalization of the world economy has made trade a key factor in the growth potential of nearly every nation’s economy. Hence, economists have become increasingly interested in the determinants of international trade and competitiveness. Empirical Methods in International Trade captures the many aspects of this trend in globalization through practical techniques well-founded in economic theory. The authors, comprising some of the most influential applied international economists of their generation, use cutting-edge models to develop empirical approaches to critical aspects of economic interchange. These approaches are developed and explained carefully with the goal of making them accessible to a wide audience.
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Chapter 7: The Role of Intra-Industry Trade in the Service Sector

Robert C. Shelburne and Jorge G. Gonzalez


Robert C. Shelburne* and Jorge G. Gonzalez 1. INTRODUCTION International trade in services has become a very important component of overall international trade. Over the past two decades trade in services has grown faster than trade in goods. In 2001 the world traded $1.5 trillion worth of services; this represented over 19 percent of total international trade. Furthermore, the trade of most developed economies tends to be even more concentrated in the service sector. For instance, service exports represented 27 percent of total US exports during 2001.1 These statistics are likely to underestimate the true volume of services trade, since much of this type of trade is done through subsidiaries and these transactions are often not included in the balance of payments statistics from which the services trade data are usually derived. The growing importance of services in international trade should not come as a big surprise since the service sector has been the largest and most dynamic sector for most developed and leading developing economies for many years. Consequently trade in services is likely to continue to grow at a rapid pace. Over the previous decades, trade in the service sector has grown in spite of arbitrary and capricious unilateral barriers imposed by national governments. Given the importance of international trade in services, it is puzzling that it was not until the mid-1980s that trade in services was the subject of multilateral trade negotiations. Under pressure from developed nations, services were brought under WTO (GATT) rule during the Uruguay...

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