Estimated bilateral trade in services by industry (EBTSI) Methodology used to create a matrix of bilateral trade in services by industry for the OECD global I/O table

Constructing OECD MRIO tables What is needed: A perfect matrix of bilateral trade flows (goods and services) decomposed by industry and by end-use Issues: –Overlap between goods and services trade statistics –Missing data in the case of trade in services –Lack of adequate methodology to assess trade in intermediate services –Correspondence between EBOPS and ISIC classifications

Allocated versus non-allocated trade in the OECD TISP database (2005) 100% = Exports reported for EBOPS 200 (total trade in services) with world as partner Share of total trade accounted for when adding over all partners and industries Average = 69%

Methodology Step 1: bilateral matrix based on “hard” data –OECD TISP database –EUROSTAT database (for EU countries) –UN trade in services database (for non-OECD economies) –IMF (for world total and rest of the world) Step 2: reconciliation of bilateral data –Exports preferred and then mirror imports Step 3: Estimation of missing bilateral flows –Prediction of zero trade flows (missing versus zero) – Extensive margin –Estimation of bilateral trade flows – Intensive margin Step 4: Industry decomposition based on national accounts Step 5: Collection of bilateral by industry data (conversion to ISIC) Step 6: Optimisation to estimate bilateral trade flows by industry –First set of constraints: total bilateral = total by industry for a given country –Second set of constraints: existing data for specific bilateral relationships

Data coverage Three years: 1995, 2000 and 2005 (panel data for the estimation ) 58 countries + “rest of the world” 15 services industries (ISIC Rev. 3)

Gravity model and estimation Structural gravity: Anderson and Yotov (2010) Estimation technique: quasi-maximum likelihood Poisson –To take into account zeros –To address the “adding-up” issue in gravity estimation (the fact that the sum of estimated trade flows exceeds the total of observed trade flows)

Optimisation Trade matrix normalised to national accounts figures National accounts Known figure coming from normalised trade statistics (used as lower bound) Predicted zero

Robustness checks Comparison between estimated and observed data (in particular for industries where EBOPS and ISIC categories are similar). Full estimation (at the bilateral by industry level) versus estimation + optimisation

How can you help? We need more bilateral data broken down by industry –Some information on unallocated trade? Identify zeros (as opposed to missing or confidential data) Data for 1995