Trade-in Goods and Trade in Services: The Picture After 2008

Abstract The goods and services sectors are contributing to a larger scale of GDP in OECD countries following the great recession of 2008. Using a structural gravity model and the constructed home bias index in a panel structure from 2007 to 2017 for OECD countries, this paper shows that trade in goods facilitates trade in services for the USA and the UK. Also, the USA has the highest magnitudes with a surplus in the services sector among all OECD countries. At the country level, a country with higher trade in goods will have more top trade in services. This study finds that the pattern of trade for OECD countries is ambiguous. Surprisingly, the services sector is growing faster than the goods sector in Canada after 2015 as the Canadian government opened the door to skilled immigrants. JEL Codes : F13, F14, F15, and F62.