Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2016:27: Linking Services to Manufacturing Exports

Björn Thor Arnarson () and Joakim Gullstrand ()
Additional contact information
Björn Thor Arnarson: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Joakim Gullstrand: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: In this paper we analyse the interplay between services and manufacturing. This is done through identifying and quantifying a direct link between manufacturing exports and the sales by service providers. For identification of this transmittance mechanism, with the help of highly detailed geographic data, we create a Localised Export Exposure (LEE) variable that captures the variation in demand for service inputs based on nearby exporters. Since service firms are much less geographically specialised than manufacturing firms, we observe a high variation in their exposure to demand changes. This spatial variation in the demand for service inputs results from a variation in local export volumes (LEE); which is used to assess the interplay between manufacturing exports and services. Our results show that a 1% increase in exports increases the volume of sales of service firms by 0.2% (and employment within the firm by 0.06%). The results show also that the link is highly local and the strongest impact is within 20 km of the shock.

Keywords: Spillovers; Services; Manufacturing Exports; Input-output linkages

JEL-codes: F10; F14; F60

32 pages, First version: October 13, 2016. Revised: February 24, 2017.

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