NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Trade Liberalization in Manufacturing and Accelerated Growth in Services in India

Rajeev H. Dehejia, Arvind Panagariya

NBER Working Paper No. 19923
Issued in February 2014
NBER Program(s):         ITI

The impact of trade liberalization on accelerated manufacturing growth has been widely studied in the literature. What has gone unappreciated is that liberalization has also been accompanied by accelerated services growth. Using firm-level data from India, we find a positive spillover from manufacturing growth stimulated by trade and other liberalization to gross value added, wages, employment, and worker productivity in services, especially large urban firms and in service sectors whose output is used as a manufacturing input. We find that improved access to inputs via trade liberalization led to increased gross value added and worker productivity in capital-intensive service sectors.

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This paper was revised on March 5, 2014

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Document Object Identifier (DOI): 10.3386/w19923

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