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Comparative Advantages in U. S. Bilateral Services Trade with China and India

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  • Lirong Liu
  • Hiranya K. Nath
  • Kiril Tochkov

Abstract

Using bilateral trade data for 16 service categories, this paper examines the patterns, evolution, and determinants of comparative advantage (CA) in U.S. services trade with China and India from 1992 to 2010. The results indicate that the U.S. has a CA in most services, except in more traditional ones, such as travel and transportation. However, India, and more recently China, gained a CA in modern services, such as computer and information services during the period considered in this paper. An examination of the distributional dynamics indicates that the likelihood of U.S. gaining CA over an initial position of comparative disadvantage (CDA) in its trade of a particular service with India is higher than the probability of losing its initial dominance. In contrast, the U.S. CA or CDA vis-??-vis China exhibits high levels of persistence over time. The regression results suggest that relative abundance of sector-specific labor, human capital, and FDI inflows have been significant sources of CA for the U.S. over both China and India.

Suggested Citation

  • Lirong Liu & Hiranya K. Nath & Kiril Tochkov, 2015. "Comparative Advantages in U. S. Bilateral Services Trade with China and India," William Davidson Institute Working Papers Series wp1092, William Davidson Institute at the University of Michigan.
    • Handle: RePEc:wdi:papers:2015-1092
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    1. Uday M. Apte & Hiranya K. Nath, 2012. "U.S. Trade In Information-Intensive Services," World Scientific Book Chapters, in: Vandana Mangal & Uday Karmarkar (ed.), The UCLA Anderson Business and Information Technologies (BIT) Project A Global Study of Business Practice (2012), chapter 6, pages 117-144, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

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    2. Binoy Goswami & Hiranya K. Nath, 2021. "India'S Revealed Comparative Advantages In Merchandise Trade With Country Groups At Different Levels Of Development," Contemporary Economic Policy, Western Economic Association International, vol. 39(2), pages 377-397, April.
    3. Cunha Nuno & Forte Rosa, 2017. "The Comparative Advantages in the Services Sector of Developing Economies," Global Economy Journal, De Gruyter, vol. 17(4), pages 1-24, December.
    4. Hiranya K. Nath & Binoy Goswami, 2018. "India’s comparative advantages in services trade," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 8(2), pages 323-342, August.
    5. Hoang, V. V. & Tran, K. T. & Tu, B. V. & Nguyen, V. N. & Nguyen, A. Q., 2017. "Agricultural Competitiveness of Vietnam by the RCA and the NRCA Indices, and Consistency of Competitiveness Indices," AGRIS on-line Papers in Economics and Informatics, Czech University of Life Sciences Prague, Faculty of Economics and Management, vol. 9(4).
    6. Priyanka Dutta & Hemanta Barman, 2022. "Services sector growth and interstate income divergence in India," Asia-Pacific Journal of Regional Science, Springer, vol. 6(3), pages 995-1015, October.
    7. Richa Khurana & D. K. Nauriyal, 2017. "Dynamics of Services Exports in India," Millennial Asia, , vol. 8(2), pages 178-193, October.
    8. Barman, Hemanta & Dutta, Mrinal Kanti & Nath, Hiranya K., 2018. "The telecommunications divide among Indian states," Telecommunications Policy, Elsevier, vol. 42(7), pages 530-551.

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    More about this item

    Keywords

    Services Trade; Comparative Advantage; China; India;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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