Services Development and Comparative Advantage in Manufacturing

Read this working paper in the Policy Research Working Papers series put out by the World Bank. The authors argue that services have to compete for resources alongside manufacturing, with implications for export industries.

Figures and Tables

Table 4

Table 4: Robustness check (3), using alternative services input intensity measures for financial & business services combined (fb)

	(1)	(2)	(3)
	Use time-varying U.S. services input intensity	Use countries' own time- varying services intensity	Use U.K.'s average Services input intensity
Dfb*SIIfb	23.941***	11.965***	30.300**
	(6.546)	(4.147)	(14.332)
TFP	0.064**	0.067**	0.067**
	(0.028)	(0.029)	(0.029)
log(emp)	0.964***	0.944***	0.969***
	(0.099)	(0.095)	(0.099)
SKratio	0.800	0.730	0.746
	(0.818)	(0.682)	(0.687)
K/L	0.070***	0.075***	0.070***
	(0.026)	(0.027)	(0.025)
rwage	0.000	-0.001	0.001
	(0.009)	(0.008)	(0.008)
GVC Participation	2.575***	2.572***	2.556***
	(0.496)	(0.499)	(0.498)
Country*Year FEs	Yes	Yes	Yes
Sector*Year FEs	Yes	Yes	Yes
Observations	5,686	5,855	5,714
R-squared	0.597	0.591	0.593

Notes: The dependent variable is manufacturing export RCA. D_fb refers to the share of financial & business services value added in GDP. In regression (1), SII_fb is the ratio of the U.S. embodied domestic financial & business services to U.S.' manufacturing value added (not averaged over years). In regression (2), SII_fb measures countries' own services input intensity (not averaged over years). In regression (3), SII_fb is the ratio of the U.K. embodied domestic financial & business services to U.K.' manufacturing value added, averaged over 1995-2007. All WIOD manufacturing sectors 3-16 are covered (not grouped together). U.S. observations are dropped from regression (1) and the U.K. observations are dropped from regression (3). Robust standard errors in parentheses, clustered by country*sector. *** p<0.01, ** p<0.05, * p<0.1.