THE MOVE TOWARDS A “SERVICE-DORMINATED ECONOMY” AND INTRA-INDUSTRY TRADE

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INTRODUCTION

This chapter introduces different aspects of intra-industry trade (IIT) in services with particular reference to South Africa-US trade in services. The chapter is organized as follows. Section 1.2 briefly explains the emergence of services as the key sector in the globalising world. Section 1.3 defines services as opposed to goods. It also provides two definitions of international trade in services. The contribution of services to national output (GDP), employment and international trade is dealt with in Section 1.4. Section 1.5 presents a statement of the research problem that resonates throughout the study. Section 1.6 presents two main hypotheses of the study. Justification and objectives of the study are presented in Sections 1.7 and 1.8, respectively. Section 1.9 deals with research methodology while Section 1.10 focuses on the scope of the study. Section 1.11 presents the conclusions from this chapter while the last section highlights the outline of the study.

THE MOVE TOWARDS A “SERVICE-DORMINATED ECONOMY” AND INTRA-INDUSTRY TRADE

The services sector has witnessed a steady growth worldwide, generating more than half of gross domestic product and jobs, and although at a much lower level, is increasingly traded internationally. Indeed, according to United Nations Conference on Trade and Development (2004b), foreign direct investment (FDI) worldwide is increasingly shifting towards services.

The definition and characteristics of services

Hill (1977:318) defined a service as “…a change in the condition of a person, or of a good belonging to some economic unit, which is brought about by the activity of some other economic unit, with the prior agreement of the former person or economic unit”. This definition emanates from the specific nature of a service, traditionally considered to be non-storable and intangible. The non-storability means that a service has to be consumed at the same time as it is produced.

Contribution of services to total trade

The share of service trade in international transactions lags behind the contribution of services in the structure of production and employment in South Africa and the US. This is not surprising given the fact that services are not easily traded due to high transaction costs as well as the fact that a significant proportion of services trade is unrecorded.

ACKNOWLEDGEMENTS
INTRODUCTION
1.1 INTRODUCTION
1.2 THE MOVE TOWARDS A “SERVICE-DORMINATED ECONOMY” AND INTRA-INDUSTRY TRADE
1.3 SERVICES
1.3.1 The definition and characteristics of services
1.3.2 Definition of international trade in services
1.4 BACKROUND INFORMATION ON SERVICES IN SOUTH AFRICA
1.4.1 Contribution of services sector to GDP and employment in South Africa.
1.4.2 Contribution of services to total trade
1.4.4 Employment in services sector
1.5 STATEMENT OF THE RESEARCH PROBLEM
1.6 HYPOTHESES OF THE STUDY
1.7 JUSTIFICATION OF THE STUDY
1.8 OBJECTIVES OF THE RESEARCH
1.9 RESEARCH METHODOLOGY
1.10 SCOPE OF THE STUDY
1.11 CONCLUSION
1.12 OUTLINE OF THE STUDY
FUNDAMENTAL LITERATURE ON INTRA-INDUSTRY TRADE.
2.1 INTRODUCTION.
2.2 THE NATURE OF SERVICES AND ITS IMPLICATIONS ON IIT
2.3 THE SPECIFIC HORIZONTAL AND VERTICALLY DIFFERENTIATED MODELS
2.4 INCORPORATING IIT INTO THE NET FACTOR CONTENT OF BALANCED TRADE
2.5.1 Relative factor intensity definition of an “industry” (HOS)
2.6 EMPIRICAL MEASUREMENT OF IIT
2.6.1 Static IIT indices
2.6.4 Horizontal and vertical IIT measures
2.6.5 “Extended” IIT
2.7 MAIN INSIGHTS AND CONCLUDING REMARKS STRUCTURE AND TRENDS IN SOUTH AFRICA-US
INTRA-INDUSTRY TRADE IN SERVICES
3.1 INTRODUCTION
3.2 SERVICES TRADE DATA ISSUES.
3.3 SOUTH AFRICA-US TRADE IN SERVICES: STRUCTURE AND TRENDS
3.4 MAIN INSIGHTS AND CONCLUDING REMARKS
BARRIERS TO INTERNATIONAL TRADE IN SERVICES IN SOUTH AFRICA AND THE US
4.1 INTRODUCTION
4.2 OVERVIEW OF SOME ISSUES UNDER THE GATS
4.3 THEORETICAL AND EMPIRICAL LITERATURE
4.4 FUNDAMENTAL ISSUES IN COMPUTATION OF HOEKMAN (1995) FREQUENCY RESTRICTIVENESS INDICES FOR SOUTH AFRICA AND THE US
4.5 SERVICES TRADE BARRIERS IN SOUTH AFRICA
4.6 SERVICES TRADE BARRIERS IN THE US
4.7 MAIN INSIGHTS AND CONCLUDING REMARKS
EMPIRICAL DETERMINANTS OF SOUTH AFRICA-US INTRA-INDUSTRY TRADE IN SERVICES
5.1 INTRODUCTION
5.2 THEORETICAL LITERATURE ON THE DETERMINANTS OF IIT
5.3 EMPIRICAL LITERATURE ON THE DETERMINANTS OF IIT IN SERVICES
5.4 MODEL SPECIFICATION FOR THE SOUTH AFRICA-US IIT IN UNAFFILIATED SERVICES
5.5 DATA DESCRIPTIONS
5.6 THE ESTIMATION METHODS
5.7 STATISTICAL INFERENCE USING CLASSICAL APPROACH
5.8 STATISTICAL INFERENCE USING BOOTSTRAPPING
5.9 PANEL UNIT ROOT TESTS
5.10 DIAGNOSTIC TESTS OF FIRST-ORDER ASYMPTOTIC THEORY ESTIMATION RESULTS
5.11 IMPLEMENATION OF THE BOOTSTRAP METHOD
5.12 INTERPRETATION OF THE ESTIMATION RESULTS.
5.13 POLICY IMPLICATIONS
5.14 MAIN INSIGHTS AND CONCLUDING REMARKS
SOUTH AFRICA-US MARGINAL INTRA-INDUSTRY TRADE AND LABOUR MARKET ADJUSTMENTS
6.1 INTRODUCTION
6.2 THEORETICAL LITERATURE ON THE SMOOTH ADJUSTMENT HYPOTHESIS (SAH)
6.3 MARGINAL INTRA-INDUSTRY TRADE (MIIT) MEASURES
6.4 EMPIRICAL TESTING OF THE SAH
6.5 LABOUR MARKET- INDUCED ADJUSTMENT COSTS IN SOUTHAFRICA
6.6 MAIN INSIGHTS AND CONCLUDING REMARKS
SUMMARY AND POLICY IMPLICATIONS
7.1 INTRODUCTION
7.2 RESTATING THE STATEMENT OF THE RESEARCH PROBLEM
7.3 GENERAL LITERATURE ON INTRA-INDUSTRY TRADE
7.4 THE STRUCTURE AND TRENDS IN SOUTH AFRICA-US IIT IN SERVICES
7.5 BARRIERS TO TRADE IN SERVICES
7.6 DETERMINANTS OF SOUTH AFRICA-US IIT IN SERVICES
7.7 FACTOR MARKET ADJUSTMENT EFFECT OF IIT
7.8 POLICY RECOMMENDATIONS
7.9 LIMITATIONS OF THE RESEARCH
7.10 SUGGESTIONS FOR FURTHER RESEARCH