Imports of services and economic growth: A dynamic panel approach

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1 - Susainable growh, Employmen creaion and Technological Inegraion in he european knowledge-based economy Impors of services and economic growh: A dynamic panel approach Xiaoying L David Greenaway, Rober C. Hine GEP, School of Economics, Universiy of Noingham May 2003 Absrac Inernaional rade is one of he major channels hrough which echnology diffusion occurs. Over he las decade, services secors have become increasingly imporan in domesic economic growh, especially in developed counries. However, mos of he exising sudies look a he echnology spread hrough oal rade or rade in manufacuring (e.g. machinery secor) and few of hem examine he role of rade in services. This paper applies a dynamic panel approach o invesigae he impac of impors of services on economic growh wih a panel of 82 counries. The resuls sugges ha impors of services have a significan posiive impac on economic growh in developed counries and a negaive impac in developing counries. The resuls also sugges ha impors of oher services have significan posiive effec in developed counries while impors of ransporaion and ravel have no significan effec. Keywords: rade of services, economic growh, dynamic panel daa

2 Impors of services and economic growh: A dynamic panel approach 1. Inroducion Technology plays a key role in explaining differences in income and produciviy levels across counries. Wih growing globalisaion, he inernaional diffusion of echnology has become increasingly imporan in shaping he world s disribuion of income and produciviy. Recen work has shown ha he major sources of echnical change leading o produciviy growh in mos OECD counries are no domesic; insead, hey lie abroad (Eaon and Korum 1999, Keller 2002). The inernaional diffusion of echnology is herefore a major deerminan of naional per capia incomes. The spread of echnology may ake place hrough various channels, he mos imporan of which are rade, foreign direc invesmen (FDI) and licensing. The role of rade and FDI in echnology diffusion and economic growh has generaed an exensive lieraure in recen years. Alhough here has been much work on he relaionship beween rade and growh, he exising sudies look only a he impac of aggregae rade in boh services and manufacuring secors. The process of deindusrialisaion of he OECD economies, especially over he las decade, has raised awareness of he increasing dominance of he services secor in employmen and oupu. Iniially here was concern ha he slow rae of produciviy growh in many services aciviies would have an increasingly negaive impac on economic performance. However, i is now more widely recognised ha some services paricularly hose relaed o finance and business in fac play a criical par in economic developmen. Moreover a large componen of rade and FDI is in services and his raises he issue of he imporance of he inernaionalisaion of services for produciviy improvemen and economic growh. Many exising sudies invesigae he impac of openness in goods and growh. The empirical cross-counry sudies by Dollar (1992), Sachs and Warner (1995), Ben- 2 -

3 David (1993), Edwards (1998) and Coe (1997) sugges ha he impac of liberalisaion of rade in goods on he long run rae of economic growh is posiive, while a recen paper (Rodrigues and Rodrik, 1999) quesions he robusness of he resuls. However, he sudy on he openness in services and growh is quie limied. If liberalising rade in goods, which ypically accouns for less han half of GDP in mos counries, and even less han a hird of oupu in he indusrial economies, can affec economic growh, hen here should be comparable gains from liberalising services ha are becoming increasing radable and ha accoun for a large and growing share of oupu in mos counries. Likewise, in he lieraure of inernaional echnology diffusion hrough rade, only rade in goods or aggregae rade is examined. There are no sudies available on he role of rade in services in echnology diffusion. In his paper, we invesigae empirically he relaionship beween impors and economic growh for services and for manufacuring. Using a counry level panel of 82 counries, we examine wheher impors of services have a posiive impac on economic growh. This paper is organised as follows; secion 2 reviews he lieraure on rade and growh and rade in services and growh. Secion 3 ses ou he mehodology employed and provides a descripion of he daa. Secion 4 presens he resuls of our regression analysis, and secion 5 concludes. 2. Lieraure review Trade and growh The ineracion beween rade and economic performance has radiionally been one of he cenral concerns of developmen economics. Ofen i seems ha microeconomic sudies allow a much sharper discriminaion beween hypoheses han he aggregae sudies of rade growh. However, researchers have long been aware ha micro sudies frequenly miss he economy-wide resource allocaion effecs ha may be cenral o undersanding he effecs of rade. This awareness parly explains why he firs cross-counry sudies of openness and growh considerably pre-dae much of he 3 -

4 res of he empirical growh lieraure. Trade may have effec on economic growh hrough various channels, one of which is echnology diffusion hrough impors. Inernaional rade as a channel for echnology diffusion has received much sudy recenly, hough he resuls remain conroversial. In he area of rade and echnology diffusion, a number of differen approaches have been employed o sudy empirically he imporance of he inernaional dimension 1 (see he review paper Inernaional echnology diffusion by Keller, 2001a). The firs and larges se of papers consiss of so-called inernaional R&D spillover regressions. Typically, a producion funcion approach is used o relae oal facor produciviy (TFP) o measures of domesic and foreign research and developmen (R&D) aciviies. Foreign R&D is ypically given by a weighed sum of all oher counries R&D aciviy - weighs are usually defined on he basis of bilaeral impors, FDI ec. These regressions are parial equilibrium in naure. The second approach employs general equilibrium models in which produciviy growh is relaed o increases in he qualiy of inermediae goods (Eaon & Korum, 1997,1999, Eaon, Guierrez & Korum, 1998). The drawback of his approach is ha hey have o make some srong assumpions which are difficul o es in he conex of a given model. Thus he empirical resuls are beer viewed as esimaing or simulaing a paricular model, raher han selecing one model among several, or esing i. The recen work by Keller (2001b, 2002) represens a hird approach. The relaionship beween produciviy and foreign R&D is sudied in a single equaion, parial equilibrium framework. Unlike he approach aken in he R&D spillovers lieraure, Keller esimaes he TFP effec of foreign R&D joinly wih he imporance of one or more channels of diffusion for foreign R&D. One can view his as esimaing he weighs of he foreign R&D variable ogeher wih he parameer ha measures he TFP elasiciy. Esimaing he weighs insead of assuming paricular weighs ha are aken from daa ables means ha less srucure is imposed ex-ane. A common approach of examining he echnology diffusion hrough impors is o invesigae he effecs of weighed foreign R&D using bilaeral impors as he weighs. This requires bilaeral rade daa. Keller (1998) analyses he findings by Coe 1 For more informaion, see he recen review paper Inernaional echnology diffusion by Keller (2001a). 4 -

5 and Helpman (1995) of rade-relaed inernaional R&D spillovers and shows ha randomly creaed bilaeral rade shares also give rise o large esimaed inernaional R&D spillovers. Therefore, he volume of impors can be used as a measure of foreign R&D. The above sudies all employ he volume of rade o examine he knowledge spillover hrough rade. However, alhough openness o rade does appear o be imporan for he knowledge spillover, he volume of rade may or may no be. Falvey, Foser and Greenaway (2002) include a measure of openness in he growh equaion and find ha openness affecs growh hrough channels oher han knowledge diffusion. Unlike he earlier sudies, hey employ a growh model which allows one o capure more adequaely oher facors ha may affec he exen of knowledge spillover ha are no aken accoun of in TFP calculaions. This sudy also employs differen weighing schemes for he knowledge spillovers o es he robusness of he resuls obained, and employs a dynamic panel model ha allows knowledge spillovers o have boh a shor-run and long-run impac on growh. Trade in services and growh Alhough here is a large and varied lieraure on he role of rade in economic growh, few sudies have looked a spillovers hrough rade in services. However, services rade may play an imporan role in echnology diffusion since many of he service secors, such as financial services, compuing and informaion processing, or managemen consulancy, are knowledge-inensive. Some sudies sugges ha services ac as inermediae inpus and hereby faciliae oher economic aciviies. In he model of Francois (1990), business services co-ordinae and conrol specialised operaions wihin firms and become more significan as scale increases and producion processes become more complex. In analysing he role of services rade, one approach has been o examine in deail paricular indusries. Maoo e al (2001), for example, look a such prominen services as he financial secor, elecommunicaions and ranspor. They argue ha an efficien and well-regulaed financial secor leads o an efficien ransformaion of savings o invesmen, ensuring ha resources are deployed where hey have he 5 -

6 highes reurns; benefis also arise from increased financial produc variey and beer risk-sharing in he economy. In he case of elecommunicaions, improved efficiency generaes economy-wide benefis since elecommunicaions are a vial inermediae inpu and are also crucial o he disseminaion and diffusion of knowledge he spread of he inerne and he dynamism ha his has len o economies around he world is a elling esimony o he imporance of elecommunicaions services. Similarly, ranspor services conribue o he efficien disribuion of goods wihin a counry and a counry s abiliy o paricipae in global rade, hus helping o realise he benefis of inegraion. Oher services are also crucial. Business services such as accouning and legal services are imporan in reducing ransacion coss. Collier and Gunning (1999), for insance, consider high ransacion coss as he mos significan impedimen o economic growh in Africa. According o Summers (1999), he single mos imporan innovaion in he hisory of he American capial markes was he idea of generally acceped accouning principles. Sofware developmen is he foundaion of he modern informaion-based economy. Likewise, educaion and healh services are necessary in building up he sock of human capial, a key ingredien in long run growh performance. Resricions on rade in goods reduce he level of real GDP, which is equivalen o a loss in welfare. Resricions on rade in services can, in principle, be expeced o have similar welfare coss as hey oo drive a wedge beween domesic and foreign prices of services. Many of he empirical secoral sudies produced so far lend some suppor o his conenion (Hoekman, Braga, 1997). I has been suggesed ha in he case of services, here is an addiional wis in ha many services are inpus ino producion and inefficien producion of such services acs as a ax on producion. Thus, goods liberalisaion in he absence of services liberalisaion could well resuls in negaive effecive proecion for goods, highlighing he need for he laer o keep pace wih he former (Hoekman, Djankov, 1997). Kim and Kim (2000) examine he changes in produciviy in services and manufacuring in Korea over he period They focus paricularly on he role played by he liberalisaion of services in produciviy growh. They conclude ha i is probably oo early o give a definie answer on his. However, here was a produciviy improvemen cerain secors such as disribuion services which had a large inflow of FDI due o liberalisaion in he 1990s. 6 -

7 3. Mehodology and daa There are wo differen ways o analyse spillovers hrough rade. One approach, which is widely used in he above lieraure, is o examine he conribuion of R&D spillovers o TFP growh. The alernaive approach is o use an oupu growh equaion. In principle, he choice beween he wo should no be oo imporan. Using a TFP growh equaion has he meri of looking direcly a he impac of rade in services on produciviy growh. However, using oupu growh avoids he errors one migh inroduce in calculaing TFP, and allows a more ready comparison wih he majoriy of growh equaions. In paricular, we can examine he sensiiviy of he resuls o he inclusion of oher variables found o be significan in growh equaions. In his sudy, we adops a producion funcion esimaion approach. There has been an enormous lieraure around he esimaion of growh models. Alhough here is no single growh model o which every analys would subscribe, here is a widely acceped consensus around wha he core model should look like. Following he work of Levine and Renel (1992) and Sala-i-Marin (1997), here has been some convergence concerning he variables which should be included in empirical growh models. Mos models include as explanaory variables: invesmen share, populaion growh, iniial GDP per capia and iniial human capial. Our specificaion includes hese variables ogeher wih he share of rade in services in GDP and he share of rade in manufacuring secors in GDP. The basic specificaion for our model herefore is: + ln y = α ln y + i i α, 1, 65 2 α 5( SER GDP) + α 6 POP + α 3SCH ( MANU GDP) ln 65 + α ε + 4 ln GDI (1) Where, for counry i y i = Real GDP per capia; y i, 65 = Real GDP per capia as a 1965; POPi = Populaion; 7 -

8 SCH 90 = Level of secondary school aainmen 3 as a 1990; GDIi, = Gross domesic invesmen; ( SER GDP) ( MANU GDP) = The raio of rade in services o GDP; = The raio of rade in manufacuring o GDP. Specificaions of his ype have been widely used, no o model movemens from one seady sae o anoher bu o invesigae he ransiional effecs of liberalisaion and oher policy swiches, by for example Easerley (1993), Fischer (1993) and Boone (1996). Alhough such equaions have been widely used, Eq. (1) may be dynamically mis-specified. Therefore, we model growh dynamically by inroducing a lagged dependen variable. The use of a dynamic model has he advanage ha i allows rade in services o have boh a shor-run and a long-run impac on growh. The dynamic model ha we esimae herefore is: ln y = β ln y + i i α ln y + i α ln,, 1 1,65 2 POP α 5( SER GDP) + α 6( MANU GDP) + + α 3SCH ε α 4 ln GDI (2) where y i, 1 are lags of GDP per capia. This has an obvious inuiive appeal in ha i models growh in a dynamic conex and allows us o rack he shor run effecs. However, including lags induces a correlaion beween he error erm and he lagged dependen variable. A normal echnique for dealing wih variables ha are correlaed wih he error erm is o insrumen hem. There are a number of candidaes, he mos well-known are Anderson- Hsiao and Arellano-Bond approaches. The Anderson- Hsiao 3 This is he secondary school average aainmen of he populaion above 25 years. I is calculaed using he Barro & Lee human capial aainmen ables. To illusrae, suppose ha 10 percen of a populaion above 25 has ever aended secondary school, and ou of his group only 75 percen compleed secondary school (6 years), wih he remaining going only hrough he firs cycle (3 years). Then, he secondary school aainmen is 0.10x[3x x0.75]+ 0.9x0=0.53. We also experimened wih using average school years and he raio aending secondary school as measures of human capial aainmen, and obained similar resuls for he firs of hese, bu somewha differen resuls for he second. 8 -

9 insrumenal variables esimaor may be consisen, bu is no efficien because i does no ake ino accoun all he available momen resricions. Arellano and Bond (1991) argue ha a more efficien esimaor resuls from he use of addiional insrumens whose validiy is based on orhogonaliy beween lagged values of he dependen variable and he errors. This Arellano-Bond esimaor is now widely used in shor dynamic panels, and in his paper, we use he Arellano and Bond (1991) approach as we have shor period daa se. We have drawn from he lieraure ha relaionship of impors and growh is conroversial. In his paper, we aim o invesigae wheher rade in manufacuring and rade in services have impac on growh differenly. Over he las decade, average growh of rade in services was higher han ha of rade in manufacuring, bu didn exhibi a consisen rapid growh, and rade in manufacuring sill dominaes world rade. Table 4 presens he share of oal services in oal rade in services and goods by zones he specific counries. The resuls confirm ha he share of rade in service in oal rade doesn change significanly in 1990s.rade in services is much smaller han rade in goods, accouning for abou 20% of he world rade. To look a he quesions more closely, we firs esimae he impac of impors (services plus manufacuring) on growh, hen divide impors ino impors of services and impors of goods and look a he effecs separaely. For developed counries, we have more disaggregaed daa which allow us o divide rade in services ino rade in ransporaion, rade in ravel and rade in oher services 4. As rade in oher services has grown faser han rade in he oher wo indusries over he las decade and rade in oher services are more echnologically advanced, he hree indusries are expeced o have differen impac on economic growh. We also include he raio of R&D expendiure o GDP as an independen variable in he equaions of developed counries 5. 4 The definiion of indusry is based on he indusry classificaion of OECD. Inernaional ransacions in services are grouped under hree major caegories: ravel, ransporaion, oher commercial services. Oher commercial services include all services excluding ransporaion and ravel.the main caegories of oher commercial services are as follows: communicaions services, consrucion services, insurance services, oher financial services, compuer and informaion services, royalies and licence fees, equipmen renals, managemen services, adverising and relaed services, research and developmen, miscellaneous services o business, audio-visual services, personal culural and recreaional services. 5 Daa on he R&D expendiure of developing counries is no available. 9 -

10 We can also find from Table 5 ha he relaive imporance of service secors as well as he radabiliy of services differs grealy across individual counries. Comparing impors for he differen counries, he impors of services as a percenage of oal goods and services is around 27% in Japan, while around 15% in he Unied Saes. Moreover, EU, Unied Saes and Japan accoun for more han 60% of he world rade in services. Generally speaking, rade in services in developed counries is more imporan o world rade han ha in developing counries. We herefore expec ha rade in services has differen effec on growh in developed counries and developing counries. Furhermore, developing counries are divided ino hree differen counry groups according o he economic groupings defined by he World bank and hus he sub-samples are: upper-income counries, lower-income counries, low-income counries. For he sandard explanaory variables of growh equaions, we expec he signs of coefficiens of domesic invesmen growh and iniial human capial o be posiive, and hose of populaion growh and iniial GDP per capia o be negaive. Daa was colleced for 114 counries, of which 21 are developed and 93 are developing. For developed counries, we have 15 years daa beween 1985 and 1999, for developing counries, 10 years beween 1990 and Daa on rade in services are aken from World Trade Saisics (WTO) and OECD rade in services saisics, which allow us o consider a 10-year period for developing counries and a 15-year period for developed counries. Naional accouns daa, such as he growh raes of income, iniial incomes, ineres raes, inflaion raes and financial deph are aken from he Growh daa resources on he web mainained by he World Bank. Daa on he labour force is aken from World Developmen Indicaors (World Bank). R&D is from Basic Saisics of Science and Technology (BSTS, OECD). For he educaion aainmen, we use he daa consruced by Barro and Lee (2000). Originally we had 114 counries in he sample, bu finally include 82 of hem, of which 20 are developed counries and 62 developing counries. There are wo reasons for he reducion in he sample. Firs, he qualiy of he daa for some counries is considered unreliable. Secondly, he inclusion of some counries especially hose ha were very small - was hough likely o disor he resuls. 10 -

11 4. Empirical resuls The esimaion resuls are repored in Tables 1-3. Table 1 presens he regression resuls of impors and economic growh for all counries and for developing counries, Table 2 for developed counries and Table 3 for 12 EU counries 6. We firs examine he impac of impors of boh services and manufacuring secors and hen look a he effecs of services and manufacuring separaely. The Sargen es is saisfied and he es for second order correlaion is rejeced. We find ha he majoriy of he core variables in he model are of he expeced sign and are significan. Thus, a low iniial GDP and high iniial level of schooling are associaed wih faser growh in GDP per capia. Faser populaion growh is associaed wih slower growh of GDP per capia. Impors are aken as one of he major channels hrough which inernaional echnology diffusion happens, impors are expeced herefore o have a posiive impac on economic growh in he hos counries. From (1.1) and (1.2), we can see ha oal impors has a significan posiive impac on growh in all counries and developing counries. In (1.5), (1.7) and (1.9), when he developing counries are divided ino hree income groups, he resuls are more mixed. Afer breaking impors ino rade in services and rade in manufacuring, we find ha rade in services has a significan negaive impac on growh in all of he five specificaions, while rade in manufacuring has a significan posiive impac on growh excep in (1.10). This is anoher ineresing finding. Comparing his wih he resuls in Table 2, we find ha impors of services have differen effecs in developed counries and developing counries. In Table 2, we can see ha for developed counries, rade in services has a significan posiive impac on growh and rade in manufacuring has negaive impac alhough insignifican. In Table 3, we presen he regression resuls for EU counries, we can see from he able ha he resuls are qualiaively he same as hose in able 2. 6 Due o daa problem, we exclude Germany, Belgium and Luxembourg and herefor have 12 EU counries in he sample. 11 -

12 Why do impors of services appear o have differen effec on growh in rich and poor counries? Over recen years, services secors have experienced an imporan expansion in he developed counries. In 1998, 65 percen of employmen and value added was in services in he EU. By conras, he saus of services in mos of he developing counries remains a a lower level. Thus o he exend ha services impors diffuse knowledge and echnical know-how ino he services of he developing counries, he impac in rich counries is poenially greaer han in poor counries. A second possible explanaion lies in he naure of he services rade flows. We migh expec impors of business services, for example, o have a more posiive effec on growh han impors of ourism (i.e. expendiure of ouriss in foreign counries). Unforunaely, due o daa limiaion, we can es his argumen only parially. For he developed counries, we can dis-aggregae services impors ino hree caegories. When we inroduces hese caegories separaely ino our growh equaion, we find ha i is he caegory of oher services, including business services, which has a significan posiive effec on growh. Indeed, impors of ranspor and ourism have a negaive effec on growh, usually significan. The same daa breakdown is no available for developing counries. 5. Conclusion In his paper, we have esed a dynamic model of growh in he conex of differen counry groups and, more imporanly, differen indusries. There have been many sudies on he impac of rade on growh of real GDP per capia, however, few of hem look a he impac of rade in differen indusries. For he firs ime, we examine he impacs of rade in services and rade in manufacuring on growh separaely. We apply a dynamic panel approach and use Arrelano-Bond esimaion mehod o correc for correlaion. Our main findings are ha impors in services have a significan posiive effec in developed counries while heir effec does no appear o be significan in developing counries. Of paricular noe, i is impors of oher services, including business services, ha are responsible for his oucome. Impors of manufacuring have been recognised as an imporan channel for he inernaional diffusion of echnology, his sudy sugges ha for developed counries, impors of business may also serve o diffuse economically imporan knowledge and know-how and hence o promoe economic growh. 12 -

13 Alhough we have obained some ineresing resuls here, here is sill much space o improve he work. For example, we may examine he R&D spillover hrough rade in services if we can have bilaeral daa of rade in services available, which is in line wih he work of Keller ec. and is widely used in lieraure on inernaional echnology diffusion. We may also do more work on he impac of impors of services in developed counries, and in paricular o look a specific services secors such as finance, compuing and informaion processing and elecommunicaions, which are expeced o embody high echnology. References Arrelano, M. and S. Bond (1991), Some ess of Specificaion for Panel Daa: Mone Carlo Evidence and an Applicaion o Employmen Equaions, Review of Economic Sudies, Vol. 58, p Balassa, B (1978), Expors and Economic Growh, Journal of Developmen Economics, Vol. 5, p Balassa, B (1984), Adjusmen Policies in Developing Economics, World Developmen, Vol. 12, p Barro, R. J., and Sala-i-Marin (1995), Economic Growh. Collier, P. and J.W. Gunning (1999), Why was African Grown Slowly, Journal of Economic Perspecives, Vol. 13, No. 3, p3-22, Summer. Chao, W. S. and J. Buongiorno (2002), Expors and growh: a causaliy analysis for he pulp and paper indusries based on inernaional panel daa, Applied Economics, Vol. 34, p1-13. Eaon, J., E. Guierrez and S. Korum (1998), European Technology Policy, Economic Policy, Vol 27, p Eaon, J. and S. Korum (1997), Engines of Growh: Domesic and Foreign Sources of Innovaion, Japan and he World Economy, Vol.9, p Eaon, J. and S. Korum (1999), Inernaional Paening and Technology Diffusion: Technology and Measuremen, Inernaional Economic Review,40, p Falvey, R. N. Foser and D. Greenaway (2002), Norh-Souh, Technology spillovers and Growh, working paper no, 15/2002, European Economy Group(EEG). 13 -

14 Francois, J. (1990), Producer services, scale and division of labour, Oxford Economic Paper, Vol. 42, p Ghirmay, T, R. Grabowski and S. C. Sharma (2001), Expors, invesmen, efficiency and economic growh in LDC: an empirical invesigaion, Applied Economics, Vol. 33, p Hoekman, B. and C. P. Braga (1997), Proecion and Trade in Services: A Survey, Open Economic Review, Vol. 8, p Hoekman, B. and S. Djankov (1997), Effecive Proecion and Invesmen Incenives in Egyp and Jordan: Implicaions of Free Trade wih Europe, World Developmen, Vol. 25, p Jin, J (2002), Expors and growh: is he expor-led growh hypohesis valid for provincial economies?, Applied Economics, Vol. 34, p Jung, W. and P. Marshall (1985), Expors, Growh and Causaliy in Developing Counries, Journal of Developmen Economics, Vol. 18, p1-12. Kavouss R. (1984), Expor Expansion and Economic Growh: Furher Empirical Evidence, Journal of Developmen Economics, Vol. 18, p1-12. Keller, W (2001a), Inernaional Technology Diffusion, working paper No. 8573, NBER. Keller, W (2001b), Knowledge Spillovers a he World s Technology Fronier, working paper No. 2815, CEPR. Keller, W (2002), Geographic Localisaion of Inernaional Technology Diffusion, American Economic Review, Vol. 92, No.1, p Levine, R. and D. Renel (1992), A sensiiviy Analysis of Cross-Counry Growh Regressions, American Economic Review, Vol. 82, p Mao, A., R. Rahindran and A. Subramanian (2001), Measuring Services Trade Liberalisaion and Is Impac on Economic Growh: An Illusraion, working paper No. 2655, World Bank. Michaely, M. (1977), Expors and Growh: An Empirical Invesigaion, Journal of Developmen Economics, Vol. 4, p Moschos, D. (1989), Expor Expansion, Growh and he Level of Economic Developmen, Journal of Developmen Economics, Vol. 15, p Sala-i-Marin, X. (1997), I jus ran wo million regressions, American Economic Review, Vol. 87, p

15 Salvaore, D. and Hacher, R. (1991), Inward and Ouward Oriened Trade Sraegies, Journal of Developmen Sudies, Vol. 27, p7-25. Sargan, J. D. (1958), he Esimaion of Economic Relaionships Using Insrumenal Variables, Economerica, Vol. 26, p Summers, L(1999), Reflecions on Managing Global Inegraion, Journal of Economic Perspecives, Vol. 13, p3-18, Spring. Tyler, W.G. (1981), Growh and Expor Expansion in Developing Counries, Journal of Developmen Economics, Vol. 9, p Definiion of counry groups Developed counries Ausralia, Ausria, Canada, Denmark, inland, France, Greece, Iceland, Ireland, Ialy, Japan, Neherlands, New Zealand, Norway, orugal,spain, Sweden, Swizerland, Unied Kingdom, Unied Saes. Upper-middle income counries Argenina, Boswana, Brazil, Chile, Cosa Rica, Hungary, Lavia, Malaysia, Mala, Mauriius, Mexico, Panama, Seychelles, Trinidad and Tobago, Uruguay, Venezuela Lower-middle income counries Belize, Bolivia, Colombia, Dominican Republic, Ecuador, El Salvador, Fij Guaemala, Guyana, Iran, Islamic Rep., Jamaica, Namibia, Paraguay, Peru, Philippines, Souh Africa, Sri Lanka, Swaziland, Syrian Arab Republic, Thailand Tunisia, Turkey. Low-income counries Bangladesh, Benin, Ghana, India, Indonesia, Lesoho, Mauriania, Mozambique, Nepal, Nicaragua, Pakisan, Papua New Guinea, Senegal, Sierra Leone, Uganda, Zambia. 15 -

16 - Susainable growh, Employmen creaion and Technological Inegraion in he european knowledge-based economy Table 1 : Impors in services and economic growh Differen counry groups All counries Developing counries Upper-mid income counries Lower-mid income counries Low income counries ln y 1 ln y 2 ln y (-0.90) 0.23 (4.85)*** (-8.67)*** ln POP (-7.67)*** SCH (2.46)*** ln GDI (13.53)*** IMPORTS GDP SERVICE _ IM MANU _ IM GDP GDP 0.90E-4 (3.97)*** Consan (10.81)*** (1.07) 0.14 (3.40)*** (-7.93)*** (-6.22)*** (3.05)*** (14.65)*** -0.30E-3 (-2.17)** 0.15E-3 (5.19)*** (8.97)*** (0.45) 0.17 (3.46)*** (-6.78)*** (-6.37)*** 0.47E-3 (0.22) (11.73)*** 0.11E-4 (3.44)*** (8.86)*** 0.24 (2.21)** (1.77) (-5.781)*** (-3.79)*** (0.69) (12.49)*** -0.48E-3 (-2.80)*** 0.22E-3 (5.11)*** (6.43)*** 0.22 (2.80)*** (1.19) (-4.98)*** (-0.24) (4.84)** (6.46)*** 0.16E-4 (0.29) (4.59)*** 0.48 (4.17)*** (0.75) (-3.93)*** (-0.67) (2.72)*** (-2.11)** 0.28E-3 (2.58)*** (3.77)*** 0.34 (2.94)*** 0.15 (2.13)** (-5.36)*** (-1.28) (-0.87) (8.29)*** -0.81E-5 (-1.95)** 0.11 (5.47)*** 0.35 (3.13)*** 0.14 (2.08)** (-2.98)*** (-3.04)*** -0.64E-3 (0.24) (8..72)*** (-4.47)*** 0.49E-3 (4.82)*** (3.31)*** 0.68 (4.35)*** (-1.08) (0.53) (-0.36) (-1.23) 0.11 (6.78)*** 1 s order serial correlaion nd order serial correlaion Sargan es counries E-3 (0.10) (0.70) 0.67 (4.10)*** (-1.37) 0.18e-3 (0.03) 0.21 (0.35) (-1.30) 0.11 (6.53)*** (-1.46)** 0.87E-4 (0.90) (-0.44)

17 - Susainable growh, Employmen creaion and Technological Inegraion in he european knowledge-based economy Table 2 :Impors in services and economic growh Developed counries ln y 1 ln y 2 ln y (10.88)*** (-8.04)*** (-2.57)*** ln POP SCH 90 (-1.55) 0.51E-3 (0.65) ln GDI (3.01)*** IMPORTS GDP 0.20E-3 (4.37)*** 0.96 (11.04)*** (-6.55)*** (-1.53)*** (-2.39)** 0.42E-3 (0.47) (2.97)*** SERVICE _ IM GDP MANU _ IM GDP (4.27)*** -0.71E-4 (-0.72) 0.91 (10.49)*** (-6.46)*** (-2.61)*** (-1.25) (-0.45) (3.43)*** (4.55)*** -0.33E-4 (-0.33) 0.79 (9.44)*** (-6.57)*** (0.25) (-4.69)*** 0.20E-3 (0.25) (4.33)*** TRAVEL _ IM GDP (-2.70)*** TRANSP _ IM GDP (1.69)* OTHERS _ IM GDP R & D GDP (2.29)** Consan (2.71)*** 0.03 (1.76)* (2.75)*** (9.33)*** (0.12) 0.82 (9.67)*** (-6.36)*** -035E-3 (-0.18) (-4.46)*** 0.67E-4 (0.08) (4.11)*** -0.73E-4 (-0.66) (-1.22) -0.72E-3 (0.97) (8.05)***do (0.23) 1 s order serial correlaion (9.66)*** (-6.28)*** (-0.93) (-4.19)*** 0.53E-3 (0.58) (3.99)*** 0.11E-3 (-0.95) (-1.10) 0.33E-3 (0.38) (7.88)*** (1.29) (0.55) 2 nd order serial correlaion Sargan es counries

18 - Susainable growh, Employmen creaion and Technological Inegraion in he european knowledge-based economy Table 3 :Impors in services and economic growh: 12 EU counries ln y 1 ln y 2 ln y (8.98)*** (-7.16)*** (-1.86)* ln POP (-3.31)*** SCH (-0.93) ln GDI (3.09)*** IMPORTS GDP 0.52E-3 (7.00)*** 0.90 (8.78)*** (-6.96)*** (-0.97) (-3.34)*** (-1.11) (3.10)*** 0.53E-3 (7.09)*** 0.81 (8.14)*** (-5.01)*** (-1.83)* (-4.19)*** (0.60) (2.77)*** SERVICE _ IM GDP MANU _ IM GDP (3.27)*** 0.61E-4 (0.28) 0.80 (8.11)*** (-4.85)*** (-2.02)** (-4.40)*** (0.48) (2.92)*** (3.50)*** -0.64E-4 (-0.27) 0.57 (6.23)*** (-4.20)*** (1.56) (-6.15)*** (1.31) (4.61)*** 0.79E-4 (3.26)*** TRAVEL _ IM GDP (-3.44)*** TRANSP _ IM GDP (-2.33)** OTHERS _ IM GDP R & D GDP Consan (1.83)* 0.39E-4 (0.03) (1.00) (1.76)* (1.35) (2.00)** (6.47)*** (-1.32) 1 s order serial correlaion (6.22)*** (-3.98)*** (-1.27) (-7.05)*** (0.94) (4.90)*** 0.42E-3 (1.51) (-3.01)*** (-1.51) (7.29)*** (2.54)** (1.36) 2 nd order serial correlaion Sargan es counries

19 - Susainable growh, Employmen creaion and Technological Inegraion in he european knowledge-based economy Table 4: oal services as % of oal goods and services by seleced zone and counries( ) impors world EU(15) NAFTA OECD G Norh America Asia Africa USA Japan UK Ialy Sweden Table 5 : he share of service rade in world oal service rade ( ) impors EU(15) Norh America Lain America Asia Africa USA Japan UK Ialy Sweden

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