The service sector is very heterogeneous with respect to internationalization; in some industries there is international trade (or it may potentially exist), whereas other industries are non-tradable, i.e. production and consumption occur in the same place. Unfortunately, the data on international trade in services is limited and highly aggregated. This means that it is difficult, on a detailed level, to identify in which industries there are international trade. The aim of the paper is to attempt to discern in which industries in the service sector there is, or potentially might be, international trade, i.e. activities in the service sector which face, or might be exposed to, international competition.
We calculate locational Ginis for different industries in the private business sector as well as in the public sector. A high value for the locational Gini in an industry indicates that the production is concentrated regionally. If we assume that the consumption is distributed proportionally to incomes, there seems to be regional trade in such an industry, and also a potential for international trade. Our calculated locational Ginis are employed to classify industries into industries where international trade appears to occur and industries which appear to be non-tradable. As a benchmark to identify industries in the service sector where international trade might potentially exist, we use the size of the locational Ginis in manufacturing industries, since these industries are all more or less exposed to international trade.
Based on our method we find that the number of employed in tradable service appears to be at least as large as in the manufacturing sector. Remarkably, a larger share of the skilled labor exposed to international trade is working in the service sector than in manufacturing, while a majority of the less skilled labor working in tradable industries is employed in manufacturing. Wages are higher in tradable industries, and this is simply not due to the fact that the share of skilled labor is higher or that the share of women is lower in tradable industries. When it comes to employment growth, we observe that the employment has increased in tradable service, while it has fallen in the manufacturing sector (the whole sector is regarded as tradable). In particular, the employment of skilled labor has risen in most parts of the economy, and especially in the tradable sector. There seems to have been an increase of skilled labor at the expense of less skilled labor.
Serial number: WP/PM 2010:05
Reference number: 2010/256