The Role of Goods‐Trade Networks for Services‐Trade Volume

In this paper, we address the role of countries’ goods‐trade networks for their services‐trade volume. The paper employs a large cross section of bilateral trade data on aggregate cross‐border goods and services sales and illustrates that the depth and overlap of two countries’ services networks induce a positive direct impact on their services‐trade volume. The evidence takes into account that goods trade flows and networks are potentially endogenous so that the estimated direct effects support a causal interpretation. We find that the magnitude of the multilateral goods‐trade network effect on the bilateral services‐trade volume is much larger than that of bilateral goods‐trade volume.