Services firms can help manufacturing grow in developing countries. But the quality and technological competence of those companies is what matters most when it comes to positive spillover effects. The simple existence of service firms isn’t enough to make a difference for manufacturers. In addition, countries which allow more open trade in services can expect to see a greater benefit for their manufacturing sector, and that is especially true for low-income countries. The makeup of manufacturing companies is also a factor in whether they will benefit from contact with services firms.

Those are the main findings of a working paper for the Asian Development Bank Institute, which looked at the spillover benefits that service firms can have on manufacturing.

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About the authors

Deborah Winkler is a senior consultant and principal at Global Economic Policy LLC.

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