Providing Services to Boost Goods Exports: Theory and Evidence

Andrea Ariu, Florian Mayneris and Mathieu Parenti ()

Working Papers ECARES from ULB -- Universite Libre de Bruxelles

Abstract: Goods and services have been generally analyzed as two different items in the consumer portfolio supplied by firms in separate industries. In this paper, we challenge this view by providing evidence on interactions within the firm between foreign sales of goods and services. We show empirically and theoretically that demand complementarities between both activities enable firms that export goods and services - we call them bi-exporters - to boost their manufacturing exports by also providing services. The provision of services thus participates to the perceived vertical differentiation of the goods. Under monopolistic competition, adding a service boosts firms' sales only through quantities. Accounting for large oligopolistic firms uncovers instead a different channel: bi-exporting may increase firms' market power that translates into higher prices. Our IV estimates show the price channel to be important. These results imply that ignoring such complementarities will lead to a mis-quantification of the welfare and business consequences of economic integration.

Keywords: Global Value Chains; Service and Goods Trade (search for similar items in EconPapers)
JEL-codes: F10 F14 L80 (search for similar items in EconPapers)
Pages: 53 p.
Date: 2016-12
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (6)

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