Three Essays on Trade in Services, Technology, and the COVID-19 Pandemic

Trade in services is unique from goods trade because the trade costs associated withservices exports depend on whether the service is delivered in-person (via travel of producer or consumer) or remotely (via the internet). The primary goals of this dissertation are to better understand the role of the internet in determining trade costs in services trade and how the types of services traded affect public policy decisions.

In chapter 1, I consider the relationship between internet connectivity and distance relatedtrade costs in services trade. On aggregate and for 7 of the 10 services sectors considered, increases in the level of internet connectivity across country-pairs significantly decrease distance costs for services trade. The decrease in distance costs ranges from 3–32 percent, depending on the sector and level of internet connectivity. However, this result does not hold for aggregate goods trade using the same sample of countries.

Building on the trade-in-task framework of Grossman and Rossi-Hansberg (2008),chapter 2 develops a task-based model of services trade that explains choice of delivering intermediate services tasks to customers in foreign markets either in-person or over the internet. In tests of the model, I find that U.S. services exporters with a higher concentration of in-person only employees face significantly higher trade costs than those with employees more concentrated in occupations that can be performed online. Additionally, higher internet use in the importing country significantly decrease trade costs, and sectors with more in-person only employees are more sensitive to changes in commercial flight prices.

Finally, chapter 3 considers the relationship between the importance of travel servicesexports and the decision to close international borders to non-essential travel during the COVID-19 pandemic. Using bilateral data on the presence of a COVID-19 travel ban, I find that country-pairs with larger values and shares of travel services exports in 2019 are significantly less likely to impose travel bans during the COVID-19 pandemic and reopen their borders significantly more quickly than country-pairs with smaller values and shares of travel services exports.