Hostname: page-component-78c5997874-4rdpn Total loading time: 0 Render date: 2024-11-05T01:02:10.978Z Has data issue: false hasContentIssue false

Shifting into Digital Services: Does a Financial Crisis Matter and for Who?

Published online by Cambridge University Press:  22 July 2022

Erik van der Marel*
Affiliation:
ECIPE & Université Libre de Bruxelles (ULB), Belgium

Abstract

Did trade patterns in services change into activities that were more digital-intense after the Global Financial Crisis (GFC) of 2008, and was this shift structural? This paper uses a Difference-in-Difference (DID) approach to investigate whether services trade became more digital-based after the GFC in 2008. It finds support that the GFC formed a break from the previous period that caused services trade to become more digital – although there are signs that this had already started before 2008. Countries with high internet usage and a comparative advantage in digital-intense services, such as R&D, information exchange, computer services, and charges for Intellectual Property Rights (IPR), on average saw post-GFC a 6% increase in global exports compared to other non-digital sectors. More striking is that upper-middle income countries and countries with medium levels of skills also witnessed a sharp increase. These significant outcomes may indicate the direction into which patterns of services trade are likely to turn after the current economic crisis resulting from COVID-19.

Type
Original Article
Copyright
Copyright © The Author(s), 2022. Published by Cambridge University Press

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Ahn, J.B., Amiti, M., and Weinstein, D.E. (2011) ‘Trade Finance and the Great Trade Collapse’, American Economic Review 101(3), 298302.Google Scholar
Amiti, M. and Weinstein, D.E. (2011) ‘Exports and Financial Shocks’, The Quarterly Journal of Economics 126(4), 18411877.Google Scholar
Ariu, A. (2016) ‘Crisis-Proof Services: Why Trade in Services Did Not Suffer During the 2008-2009 Collapse’, Journal of International Economics 98(C), 138149.CrossRefGoogle Scholar
Balsassa, B. (1965) ‘Trade Liberalisation and “Revealed” Comparative Advantage’, The Manchester School 33(2), 99123.Google Scholar
Behrens, K., Corcos, G., and Mion, G. (2013) ‘Trade Crisis? What Trade Crisis?’, The Review of Economics and Statistics 95(2), 702–209.Google Scholar
Benguria, F. and Taylor, A. (2020) ‘After the Panic: Are Financial Crises Demand or Supply Shocks? Evidence from International Trade’, American Economic Review: Insights 2(4), 509526.Google Scholar
Bloomberg (2020) Tracking Covid-19's Impact on Trade. Supply Lines, Bloomberg, Brendan Murray, New York.Google Scholar
Borchert, I. and Mattoo, A. (2009) ‘Services Trade - The Collapse that Wasn't’, in Baldwin, R. (ed.), The Great Trade Collapse: Causes, Consequences and Prospects. London, UK: VoxEU Ebook No. 27, Centre for Economic Policy Research, ppp. 151158.Google Scholar
Borchert, I. and Mattoo, A. (2010) ‘The Crisis-Resilience of Services Trade’, The Service Industry Journal 30(3), 21152136.CrossRefGoogle Scholar
Borchert, I., Gootiiz, B., Magdeleine, J., Marchetti, J.A., Mattoo, A., Rubio, E., and Shannon, E. (2019) ‘Applied Services Trade Policy: A Guide to the Services Trade Policy Database and Services Trade Restrictions Index’, WTO Staff Working Paper (ERSD-2019-14).Google Scholar
Bricongne, J.-C., Fontagné, L., Gaulier, G., Taglioni, D., and Vicard, V. (2012) ‘Firms and the Global Crisis: French Exports in the Turmoil’, Journal of International Economics 87(1), 134146.CrossRefGoogle Scholar
Caparusso, M.J., Chen, M.Y., Dattels, M.P., Goel, R., and Hiebert, P. (2019) ‘Post-Crisis Changes in Global Bank Business Models: A New Taxonomy’, IMF Working Paper WP/19/295, Washington, DC: IMF.Google Scholar
Chor, D. (2011) ‘Unpacking Sources of Comparative Advantage: A Quantitative Approach’, Journal of International Economics 82(2), 152167.Google Scholar
Chor, D. and Manova, K. (2012) ‘Off the Cliff and Back? Credit Conditions and International Trade during the Global Financial Crisis’, Journal of International Economics 87(1), 117133.CrossRefGoogle Scholar
Clark, C. (1941) The Conditions of Economic Progress. London: Macmillan.Google Scholar
Eaton, J., Kortum, S., Neiman, B., and Romalis, J. (2016) ‘Trade and the Global Recession’, American Economic Review 106(11), 34013438.Google Scholar
Edelmann, C. and Hunt, P. (2017) ‘How the Great Recession Changed Banking. Harvard Business Review, October Issue.Google Scholar
di Mauro, F., Ottaviano, G., Vicard, V., Altomonte, C., and Rungi, A. (2012) ‘Global Value Chains During the Great Trade Collapse: A Bullwhip Effect?’, Working Paper Series 1412, European Central Bank.Google Scholar
Ferracane, M.F. and van der Marel, E. (2021) ‘Do Data Flows Restrictions Inhibit Trade in Services?’, Review of World Economics 157(4), 727776.Google Scholar
Freund, C. (2009) ‘The Trade Response to Global Downturns: Historical Evidence’, World Bank Policy Research Working Paper No. 5015. Washington, DC: The World Bank.Google Scholar
Freund, C. and Weinhold, D. (2002) ‘The Internet and International Trade in Services’, American Economic Review 92(2), 236–40.CrossRefGoogle Scholar
Freund, C., Mulabdic, A., and Ruta, M. (2019) ‘Is 3D Printing a Threat to Global Trade? The Trade Effects You Didn't Hear About’, Policy Research Working Paper No. 9024; WDR 2020 Background Paper. Washington, DC: The World Bank.Google Scholar
Haltenhof, S. (2019) ‘Services Trade and Internet Connectivity’, Discussion Paper No. 668, Research Seminar in International Economics, University of Michigan.Google Scholar
Hill, P. (1977) ‘On Goods and Services’, The Review of Income and Wealth 23(4), 315338.Google Scholar
Hoekman, B. and Mattoo, A. (2008) ‘Services Trade and Growth’, Policy Research Working Paper Series 4461, The World Bank.Google Scholar
Konings, J. and Yergabulova, A. (2021) ‘Firm Growth in Time of Crisis’, VIVES Discussion Paper, No. 93, University of Leuven, Belgium.Google Scholar
Kravis, I., Heston, A., and Summers, R. (1983) ‘The Share of Services in Economic Growth’, in Gerard Adams, F. and Hickman, B.G. (eds.), Global Econometrics: Essays in Honor of Lawrence R. Klein: Untitled OmniPage Document (rug.nl), pp. 188–218.Google Scholar
Laursen, K. (2015) ‘Revealed Comparative Advantage and the Alternatives as Measures of International Specialization’, Eurasian Business Review 5(1), 99115.Google Scholar
McKinsey Global Institute (2018) ‘A Decade after the Global Financial Crisis: What has (and hasn't) Changed?’, McKinsey Briefing Note by s. Lund, A. Mehta, J. Manyika, and D. Goldstein.Google Scholar
McMillan, M.S., Rodrik, D., and Sepúlveda, C. (2017) ‘Structural Change, Fundamentals, and Growth: Framework and Case Studies’, Working Paper 23378, National Bureau of Economic Research, Cambridge, MA.Google Scholar
Nayyar, G., Hallward-Driemeier, M., and Davies, E. (2021) At Your Service? The Promise of Services-Led Development. Washington, DC: World Bank.Google Scholar
OECD/WTO (2017) ‘Services Trade Policies and Their Contribution to Connectivity and Development’, Aid for Trade at a Glance 2017: Promoting Trade, Inclusiveness and Connectivity for Sustainable Development. World Trade Organization, Geneva/OECD Publishing, Paris.Google Scholar
OECD/WTO/IMF (2020) Handbook on Measuring Digital Trade, OECD-WTO-IMF Publication, Paris.Google Scholar
Riker, D. (2015) ‘The Impact of Restrictions on Mode 3 International Supply of Services’, Journal of International and Global Economic Studies 8(1), 120.Google Scholar
Romalis, J. (2004) ‘Factor Proportions and the Structure of Commodity Trade’, American Economic Review 91(1) 6797.Google Scholar
Sáez, S., Taglioni, D., van der Marel, E., Hollweg, C. H., and Zavacka, V. (2014) ‘Valuing Services in Trade: A Toolkit for Competitiveness Diagnostics’, The World Bank.Google Scholar
Shepherd, B. and van der Marel, E. (2013) ‘Services Trade, Regulation, and Regional Integration: Evidence from Sectoral Data’, The World Economy 36(11), 13931405.Google Scholar
WTO (2020) ‘The Future of Services Trade’, World Trade Report 2019, WTO, Geneva.Google Scholar
Supplementary material: File

van der Marel supplementary material

van der Marel supplementary material

Download van der Marel supplementary material(File)
File 87.8 KB