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Income differences in services trade partners

This article examines how differences in the income levels of trading partners influence the bilateral trade of services from 2000 to 2010. Overall, the results show that dissimilar per capita income levels across trade partners positively and significantly influence services trade. These findings hold not only when utilizing bilateral data on aggregate services trade, but also when considering bilateral services trade at the industry level. Our findings suggest that policy-makers looking to expand trade in services should foster trading relationships with partners that have dissimilar income profiles.