Tag: Service sector

Does Service-Sector Liberalization Increase Productivity in the Manufacturing Sector?

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Authors: Oleksandr Shepotylo and Volodymyr Vakhitov, KEI.

This policy brief summarizes the results of recent research on the effect of service-sector liberalization in Ukraine, 2001-2007, on productivity in the manufacturing sector. We use a sample of manufacturing firms and construct a firm-specific index of service-sector liberalization. We find that the manufacturing firms which more intensively use liberalized services, on average, have gained 9 percent in total factor productivity (TFP). The service liberalization is associated with increased foreign presence which also has a positive and significant effect on TFP. The effect is stronger for domestic and small firms.