A Theoretical and Empirical Model of the Trade and Investment in Service Industries A robust body of literature looks at the decisions of manufacturing firms to engage in trade and direct investment, however, no comparable work has been done on the service sector. Key characteristics of services trade, represented by the complexity of tasks embodied in each service, suggest that traditional goods models are not applicable to service industries. This paper develops a formal theoretical model of the decision of multinationals to engage in trade versus investment in a task-based framework incorporating contracting and communication risk. The predictions of this model are then tested using firm-level data on service producing multinationals from the Bureau of Economic Analysis US Direct Investment Abroad Benchmark Survey of Multinationals combined with task-level data from the Department of Labor’s Occupational Information Network.
Publications
“Searching for Structure in the Federal Excise Tax System: An Excise Tax Expenditure Budget.” National Tax Journal Vol. LVII, No. 3 (September 2004).
This paper was originally presented as part of a 2004 National Tax Association Spring Symposium panel honoring Bruce Davie. It builds off an article that Davie wrote for the National Tax Journal in 1994 in which he developed a typology for classifying excise taxes and identifying tax expenditures in the federal excise tax system. This paper continues where Davie left off, updating his model, adjusting for new trends in taxation, and producing an excise tax expenditure budget consistent with the normal structure of excise taxes.
Other Papers
Measuring Virtual Distance: The Role of Transport Costs in Services Trade In standard gravity models, the distance between two countries is a simple yet effective proxy for the cost of transporting goods between them. Services, however, are not physically shipped between countries. Instead, many of them are transported over the internet. Thus the cost of trading these services should depend on some measure of technological infrastructure, or “virtual distance” between two countries, not on physical distance. This paper estimates a gravity model of services trade using international internet bandwidth as a proxy for virtual distance. The results show that bandwidth is a significant predictor of trade in services but not of trade in goods. Physical distance is less of a deterrent to trade in services. pdf
Empirical Analysis of the Effect of Import Competition on US Labor Productivity in the 1990s This paper explores the degree to which import competition impacts US labor productivity and, by extension, US inflation rates. The empirical analysis uses a panel of 45 manufacturing industries for 1989 through 1998. The results reveal that import volumes as a share of domestic demand have a significant impact on labor productivity. This effect translates into a 0.30 percent per year increase in labor productivity between 1990 and 1998 that can be attributed to the role of import competition, suggesting that the rise in import volumes in the 1990s can explain at least part of the acceleration in labor productivity growth of that decade. The effect is even stronger in industries with highly concentrated market shares.