Does Services Liberalization Benefit Manufacturing Firms? Evidence from the Czech Republic
While there is considerable empirical evidence on the impact of liberalizing trade in goods, the effects of services liberalization have not been empirically established. Using firm-level data from the Czech Republic for the period 1998-2003, this...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2007/01/7309412/services-liberalization-benefit-manufacturing-firms-evidence-czech-republic http://hdl.handle.net/10986/6882 |
| Summary: | While there is considerable empirical
evidence on the impact of liberalizing trade in goods, the
effects of services liberalization have not been empirically
established. Using firm-level data from the Czech Republic
for the period 1998-2003, this study examines the link
between services sector reforms and the productivity of
domestic firms in downstream manufacturing. Several aspects
of services reform are considered and measured, namely, the
increased presence of foreign providers, privatization, and
enhanced competition. The manufacturing-services linkage is
measured using information on the degree to which
manufacturing firms in a particular industry rely on
intermediate inputs from specific services sectors. The
econometric results lead to two conclusions. First, the
study finds that services policy matters for the
productivity of manufacturing firms relying on services
inputs. This finding is robust to several econometric
specifications, including controlling for unobservable firm
heterogeneity and for other aspects of openness. Second, it
finds evidence that opening services sectors to foreign
providers is a key channel through which services
liberalization contributes to improved performance of
downstream manufacturing sectors. This finding is robust to
instrumenting for the extent of foreign presence in services
industries. As most barriers to foreign investment today are
not in goods but in services sectors, the findings may
strengthen the argument for reform in this area. |
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