Exploring the sophistication in services exports

Abstract

The paper aims at providing empirical evidence of increasing sophistication in services exported by the developing countries.The last two decades have witnessed  a phenomenal rise not only in the share of services traded by both developed and developing countries , but also, a structural shift in favour of trade in modern services as against dominance of  traditional services. Spanning over a period of 10 years i.e. from 2000 to 2010 we examine and compare the changing composition and sophistication in services exported by 38 countries comprising: Brazil, Russian Federation, India and China (BRICs), European Union (EU)-15 countries, 12-EU New Member States (EU-NMS), 5-EU Accession countries (EU- ACC), USA and Japan. We use the methodology developed by Hausmann et al (2007) which measures the level of sophistication associated with country’s export basket of goods. But in this paper we have applied this methodology to study sophistication in the export of services instead of goods.  We find that there is a big divide in the values of the sophistication index between EU-15 and EU-ACC, the latter exhibiting considerable lower values of the index.  But the gap in the value of the sophistication index between EU-15 and India, Russia, and some of the EU-NMS has narrowed.