This seminar is based on Dr. Lee’s co-authored paper which explores the Linder hypothesis holds for service trade. The Linder hypothesis originates from the premise that countries with similar per capita incomes tend to trade more with each other in manufacturing goods. The main result of this paper is that the Linder hypothesis does not hold for service trade. The rationale for this result arises from the fact that the transaction costs are still high for service trade even though recent globalization movements have negated most barriers to trade in manufacturing. Another reason for this finding is that the comparative advantages of service tasks are dispersed and not continuously distributed over per capita incomes for many developing countries. We also provide rationales for the empirical results of transaction costs variables such as common language, colony, and distance. Finally, this paper concludes summarizing the limitations of the study and providing future directions for research.

Dr. Shi Young Lee is Official Visitor, East-West Center, and Professor, College of Business & Economics, Chung-Ang University, Korea.  Dr. Lee holds a Ph.D. in Economics from the University of Chicago.  He also serves as president of the International Trade & Industry Studies Association and as external advisor to the Korea Foundation.  His research interests include international economics, applied microeconomics, behavioral economics, and political economy.