IMF Working Papers

Trade Reform in Services: Structural Change and Production Networks

By Adam Jakubik, Wentao Zhou

March 28, 2025

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Format: Chicago

Adam Jakubik, and Wentao Zhou. "Trade Reform in Services: Structural Change and Production Networks", IMF Working Papers 2025, 061 (2025), accessed May 20, 2025, https://doi.org/10.5089/9798229004763.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We study the effects of services trade reforms in a multi-country multi-sector quantitative trade model with input-output linkages. We find that (i) welfare gains from substantial services trade liberalization are large, around 3 percent on average; (ii) gains are larger by 0.7 percentage points in a hypothetical scenario where EMDEs’ consumption patterns have converged to AEs, and by 5.7 percentage points when their production networks have converged; (iii) both EMDEs and AEs gain from EMDEs reducing services barriers to the level of AEs. Services-intensive AEs with strong supply linkages to EMDEs benefit the most. Our results are important to illustrate the increasing gains from services trade as EMDEs continue on their development trajectory, and therefore call for injecting further ambition into multilateral negotiations on services trade reforms.

Subject: Consumption, Household consumption, Income, International trade, National accounts, Trade in services

Keywords: Consumption, Consumption pattern, EMDEs benefit, Global, Household consumption, Iceberg trade cost, Income, Input share, Service trade liberalization, Services Trade, Structural Transformation, Trade in services, Trade Model, Welfare gain

Publication Details

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