Publication: Service Export Sophistication and Economic Growth
Loading...
Published
2011-03-01
ISSN
Date
2012-03-19
Author(s)
Editor(s)
Abstract
Can increasing sophistication in service exports lead to economic growth? Although services were historically produced primarily for domestic consumption, they are gradually becoming more productive, tradable and unbundled. The authors construct an index of "service exports sophistication" to document this phenomenon. Panel data estimations indicate a positive association between growth in per capita income and higher sophistication of service exports. The results also suggest that this phenomenon is growing in importance over time. Considering the limits of traditional industrialization in igniting global growth, the results provide an alternative channel.
Link to Data Set
Citation
“Mishra, Saurabh; Lundstrom, Susanna; Anand, Rahul. 2011. Service Export Sophistication and Economic Growth. Policy Research working paper ; no. WPS 5606. © World Bank. http://hdl.handle.net/10986/3372 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Gender Gaps in the Performance of Small Firms: Evidence from Urban Peru(Washington, DC: World Bank, 2025-09-23)This paper estimates the gender gap in the performance of firms in Peru using representative data on both formal and informal firms. On average, informal female-led firms have lower sales, labor productivity, and profits compared to their male-led counterparts, with differences more pronounced when controlling for observable determinants of firm performance. However, gender gaps are only significant at the bottom of the performance distribution of informal firms, and these gaps disappear at the top of the distribution of informal firms and for formal firms. Possible explanations for the performance gaps at the bottom of the distribution include the higher likelihood of small, female-led firms being home-based, which is linked to lower profits, and their concentration in less profitable sectors. The paper provides suggestive evidence that household responsibilities play a key role in explaining the gender gap in firm performance among informal firms. Therefore, policies that promote access to care services or foster a more equal distribution of household activities may reduce gender productivity gaps and allow for a more efficient allocation of resources.Publication The Exposure of Workers to Artificial Intelligence in Low- and Middle-Income Countries(Washington, DC: World Bank, 2025-02-05)Research on the labor market implications of artificial intelligence has focused principally on high-income countries. This paper analyzes this issue using microdata from a large set of low- and middle-income countries, applying a measure of potential artificial intelligence occupational exposure to a harmonized set of labor force surveys for 25 countries, covering a population of 3.5 billion people. The approach advances work by using harmonized microdata at the level of individual workers, which allows for a multivariate analysis of factors associated with exposure. Additionally, unlike earlier papers, the paper uses highly detailed (4 digit) occupation codes, which provide a more reliable mapping of artificial intelligence exposure to occupation. Results within countries, show that artificial intelligence exposure is higher for women, urban workers, and those with higher education. Exposure decreases by country income level, with high exposure for just 12 percent of workers in low-income countries and 15 percent of workers in lower-middle-income countries. Furthermore, lack of access to electricity limits effective exposure in low-income countries. These results suggest that for developing countries, and in particular low-income countries, the labor market impacts of artificial intelligence will be more limited than in high-income countries. While greater exposure to artificial intelligence indicates larger potential for future changes in certain occupations, it does not equate to job loss, as it could result in augmentation of worker productivity, automation of some tasks, or both.Publication Geopolitical Risks and Trade(Washington, DC: World Bank, 2025-09-23)This paper studies the impact of geopolitical risks on international trade, using the Geopolitical Risk (GPR) index of Caldara and Iacoviello (2022) and an empirical gravity model. The impact of spikes in geopolitical risk on trade is negative, strong, and heterogeneous across sectors. The findings show that increases in geopolitical risk reduce trade by about 30 to 40 percent. These effects are equivalent to an increase of global tariffs of up to 14 percent. Services trade is most vulnerable to geopolitical risks, followed by agriculture, and the impact on manufacturing trade is moderate. These negative effects are partially mitigated by cultural and geographic proximity, as well as by the presence of trade agreements.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Sophistication in Service Exports and Economic Growth(World Bank, Washington, DC, 2011-04)Services can now be stored and traded digitally, and they are not subject to many of the trade barriers that physical exports have to overcome. Services are no longer exclusively an input for trade in goods, but have become a 'final export' for direct consumption. It is important to note that services not only have become more tradable, but also can be increasingly unbundled: a single service activity in the global supply chain can now be fragmented and done separately at different geographic locations. This has led to a new channel of growth-what we call service exports sophistication.Publication Service Export Sophistication and Europe’s New Growth Model(2011-09-01)Technology has changed the nature of service activities and made them more productive, tradable and fragmented in the global supply chain. Has Europe's growth been benefiting from the ongoing globalization of services? Services dominate growth in EU-15 countries and, to a lesser extent, in New Member States (NMS) and Accession (ACC) countries. Except in the ACC region, Europe has maintained specialization in service exports. Service productivity, tradability, and exports of modern services are high in EU-15, growing fast in NMS while at a lower pace in ACC. Service export sophistication is important for growth across the region, but especially in NMS.Publication How to Avoid Middle Income Traps : Evidence from Malaysia(World Bank, Washington, D.C., 2013-04)Malaysia's structural transformation from low to middle income is a success story, making it one of the most prominent manufacturing exporters in the world. However, like many other middle income economies, it is squeezed by the competition from low-wage economies on the one hand, and more innovative advanced economies on the other. What can Malaysia do? Does Malaysia need a new growth strategy? This paper emphasizes the need for broad structural transformation; that is, moving to higher productivity production in both goods and services. This paper examines productivity growth for Malaysia at the sectoral level, and constructs several measures of the sophistication of goods and services trade, and puts these comparisons in a global context. The results indicate that Malaysia has further opportunities for growth in the services sector in particular. Modernizing the services sector may provide a way out of the middle income trap, and serve as a source of growth for Malaysia into the future.Publication Inclusive Growth Revisited(World Bank, Washington, DC, 2013-07)The call for inclusive growth has been unanimously broadcasted by policy makers across the world. The Arab spring, the growing divide between Main Street and Wall Street in advanced economies, and the three-speed world economy have placed inclusive growth at the forefront of policy debates. However, efforts to measure and assess the determinants of inclusive growth have remained limited. What is inclusive growth? How can the micro and macro dimensions of inequality and growth be integrated to reflect both the pace and distribution of economic growth? What has driven inclusive growth in emerging markets?Publication Togo Growth Diagnostics(2010-12-01)This paper starts by analyzing past growth trends and sources of growth in Togo, as well as the structure of the economic actors in the country. The second part explores the current binding constraints to rapid and sustainable growth. For increased international competitiveness and growth, Togo will need to raise efforts to streamline its costly and cumbersome business procedures. However, for this to have a sizable impact, Togo must prove to potential investors that political stability is permanent and that corruption, poor budget execution and mismanagement of state owned enterprises belongs to the past. As a result of the new government's reform agenda and the return of international aid, a window of opportunities for high returns to the still limited public investments has opened up. This is especially true in infrastructure and connectivity services, which would not only take advantage of Togo's geographical location as a regional hub, but also make growth in Togo more inclusive. And as economic opportunities arise for the private sector, there is a need to restructure the banking sector, which has already started, to smooth distortions in the credit market. Promising sectors within agriculture that are vital to economic growth, employment opportunities, and poverty reduction remain important, but will need to overcome a number of coordination failures. Not least due to the history of government interventions causing economic distortions, the government must allow for a stronger role for private operators and encourage it wherever possible. Finally, although education does not exhibit constraints to economic activity in Togo today, it is of importance to improve the quality of education, not least to profit from and catalyze the opportunities related to Togo's potential as a regional hub.
Users also downloaded
Showing related downloaded files
Publication Breaking the Conflict Trap : Civil War and Development Policy(Washington, DC: World Bank and Oxford University Press, 2003)Most wars are now civil wars. Even though international wars attract enormous global attention, they have become infrequent and brief. Civil wars usually attract less attention, but they have become increasingly common and typically go on for years. This report argues that civil war is now an important issue for development. War retards development, but conversely, development retards war. This double causation gives rise to virtuous and vicious circles. Where development succeeds, countries become progressively safer from violent conflict, making subsequent development easier. Where development fails, countries are at high risk of becoming caught in a conflict trap in which war wrecks the economy and increases the risk of further war. The global incidence of civil war is high because the international community has done little to avert it. Inertia is rooted in two beliefs: that we can safely 'let them fight it out among themselves' and that 'nothing can be done' because civil war is driven by ancestral ethnic and religious hatreds. The purpose of this report is to challenge these beliefs.Publication Governance Matters IV : Governance Indicators for 1996-2004(World Bank, Washington, DC, 2005-06)The authors present the latest update of their aggregate governance indicators, together with new analysis of several issues related to the use of these measures. The governance indicators measure the following six dimensions of governance: (1) voice and accountability; (2) political instability and violence; (3) government effectiveness; (4) regulatory quality; (5) rule of law, and (6) control of corruption. They cover 209 countries and territories for 1996, 1998, 2000, 2002, and 2004. They are based on several hundred individual variables measuring perceptions of governance, drawn from 37 separate data sources constructed by 31 organizations. The authors present estimates of the six dimensions of governance for each period, as well as margins of error capturing the range of likely values for each country. These margins of error are not unique to perceptions-based measures of governance, but are an important feature of all efforts to measure governance, including objective indicators. In fact, the authors give examples of how individual objective measures provide an incomplete picture of even the quite particular dimensions of governance that they are intended to measure. The authors also analyze in detail changes over time in their estimates of governance; provide a framework for assessing the statistical significance of changes in governance; and suggest a simple rule of thumb for identifying statistically significant changes in country governance over time. The ability to identify significant changes in governance over time is much higher for aggregate indicators than for any individual indicator. While the authors find that the quality of governance in a number of countries has changed significantly (in both directions), they also provide evidence suggesting that there are no trends, for better or worse, in global averages of governance. Finally, they interpret the strong observed correlation between income and governance, and argue against recent efforts to apply a discount to governance performance in low-income countries.Publication Design Thinking for Social Innovation(2010-07)Designers have traditionally focused on enchancing the look and functionality of products.Publication Governance Matters VIII : Aggregate and Individual Governance Indicators 1996–2008(2009-06-01)This paper reports on the 2009 update of the Worldwide Governance Indicators (WGI) research project, covering 212 countries and territories and measuring six dimensions of governance between 1996 and 2008: Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. These aggregate indicators are based on hundreds of specific and disaggregated individual variables measuring various dimensions of governance, taken from 35 data sources provided by 33 different organizations. The data reflect the views on governance of public sector, private sector and NGO experts, as well as thousands of citizen and firm survey respondents worldwide. The authors also explicitly report the margins of error accompanying each country estimate. These reflect the inherent difficulties in measuring governance using any kind of data. They find that even after taking margins of error into account, the WGI permit meaningful cross-country comparisons as well as monitoring progress over time. The aggregate indicators, together with the disaggregated underlying indicators, are available at www.govindicators.org.Publication Government Matters III : Governance Indicators for 1996-2002(World Bank, Washington, DC, 2003-08)The authors present estimates of six dimensions of governance covering 199 countries and territories for four time periods: 1996, 1998, 2000, and 2002. These indicators are based on several hundred individual variables measuring perceptions of governance, drawn from 25 separate data sources constructed by 18 different organizations. The authors assign these individual measures of governance to categories capturing key dimensions of governance and use an unobserved components model to construct six aggregate governance indicators in each of the four periods. They present the point estimates of the dimensions of governance as well as the margins of errors for each country for the four periods. The governance indicators reported here are an update and expansion of previous research work on indicators initiated in 1998 (Kaufmann, Kraay, and Zoido-Lobat 1999a,b and 2002). The authors also address various methodological issues, including the interpretation and use of the data given the estimated margins of errors.