Document Type
Article
Abstract
This paper studies how globalization impacts structural transformation from goods to services. I construct a multi-country, multi-sector model in which the transformation occurs through changes in income, prices, comparative advantage, or input-output linkages. I parameterize it with data from 1995 to 2018 for 66 countries covering diverse stages of economic development. Decomposition exercises show that globalization outweighs productivity growth in shaping structural transformation and that globalization’s impact primarily operates through comparative advantage. Counterfactual exercises reveal globalization’s heterogeneous impact on countries’ structural transformation. I characterize the underlying factor behind this result: Globalization affected countries’ transformation to the extent that it altered their comparative advantage. In countries with sector-neutral globalization—where export trade costs relative to import trade costs changed at similar rates for goods and services—comparative advantage and structural transformation were minimally impacted. In countries with sector-biased globalization, the transformation accelerated when the globalization shifted comparative advantage toward services, but decelerated otherwise.
Digital Object Identifier (DOI)
Publication Info
Published in Journal of International Economics, Volume 160, 2026.
APA Citation
Lee, S. M. (2026). Globalization and structural transformation: The role of tradable services. Journal of International Economics, 160, 104220.https://doi.org/10.1016/j.jinteco.2026.104220
Rights
© 2026 The Author. Published by Elsevier B.V. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/).