Determinants of Export Services of USA with its Asian Partners: A Panel Data Analysis

Abstract

Trade in services has accounted for 20 per cent of global trade. Despite the increasing importance of services trade in global economy, there has been limited research on service trade which uses determinants driving such trade. The present paper has examined the export potential in service sector of USA with its Asian trade partners (Japan, China, India, Singapore, South Korea and Hong Kong) by taking into account geographic, economic and other features. The approach is based on gravity model, widely used to analyze trade in goods and has more recently been applied to service sector. Being a nature of study is of panel data i.e. for 9 years (2000-2008) and six cross sections, the study used panel data methodology. The study revealed that USA has export potential in services for India and Japan. Regarding the convergent and divergent economies, USA had convergence in exports with three Asian countries (Hong Kong, India and Korea) and divergence with three Asian countries (Japan, China and Singapore). There is a large scope for export expansion for Hong Kong, India and Korea.