infonet-economy

Participation in global value chains (GVCs) is a key element in the industrialization strategies of many developing nations. Many studies look at the determinants of GVC participation but most focus on do- mestic regulatory environments, the cost of doing business, and trade policy. This paper investigates the possibility that services also mat- ter by empirically testing for a link between higher GVC participation and services liberalization. Using the gravity framework, I examine the impact of services trade agreements on gross trade and GVC- trade (backward and forward participation). I find that services trade agreements promote both, but especially GVC-trade, although the ef- fects are heterogeneous: the impact is bigger for developing nation exporters. Moreover, I find that services agreements that allow the export of services without local presence (non-establishment rights) are particularly important in fostering GVC participation.