On the factors that affect service trade: A dynamic panel data empirical study

Trade in the service sector has increased with rapid speeds with the ever growing globalization process and technological changes. Integrated world markets provide growing demand for the service sector. In the meantime, technological advancement makes service products much easier to be traded similar to goods by continual lower trade costs and providing better infrastructure. However, due to some reasons such as lack of unified static criterion and inherent diversities in trade service, there are still many theoretical and empirical issues need to be clarified. The stable growth trend of trade in service in recent years makes it more urgent to clarify what influence the export and import of trade in services.  Many researchers find that the negative effects that come from the financial crisis on trade in service are far more less than that of goods trade. This paper studies the factors that affect trade in service by using panel data from 42 countries between 1982 and 2011. The results indicate that the export and import of service trade has obvious self-influence effects. The regression coefficients of lag terms are statistical significant. The results also show evidence that goods trade has important promotional effects on service trade. However, this effect in developing countries is relatively lower than that of developed countries. The exchange rate has moderate effects on service trade. This paper does not find strong evidence that world economic activity has strong effects on trade in service. Future work should use more detailed data sets such as the subcategories of service industries, because the service sector is extremely heterogenous. Comparative analyse can also be conducted by dividing countries into more groups according to different criterion.