Services trade and growth

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. The competitiveness of firms in open economies is increasingly determined by access to low-cost and high-quality producer services – telecommunications, transport and distribution services, financial intermediation, etc. This paper discusses the role of services in economic growth, focusing in particular on channels through which openness to trade in services may increase productivity at the level of the economy as a whole, industries and the This paper—a product of the Trade Team, Development Research Group—is part of a larger effort in the department to analyze the links between trade in services and economic development. firm. We explore what recent empirical work suggests could be done to enhance comparative advantage in the production and export of services and how to design policy reforms to open services markets to greater foreign participation in a way that ensures not just greater efficiency but also greater equity in terms of access to services. * We are grateful to Ann Harrison and Juan Marchetti for comments on an earlier version of this paper that was prepared for a September 28-29 meeting of the Commission on Growth and Development, and to Francis Ng for assistance with data. The views expressed are personal and should not be attributed to the World Bank.