Revealed Comparative Analysis of Pakistan in Services Trade

Services sector has gained significance throughout the world and its contribution towards GDP has increased in most of the countries. Services sector increase the average productivity levels in agriculture and manufacturing sectors through value added services. The developments in the field of technology have further strengthen the significance of services sector as the services trade volume has increased. This study examined the revealed comparative advantage of Pakistan in services trade with top ten trading partners in Asian region for the time period of 2007-2017. Results confirmed that Pakistan has comparative advantage in services including telecommunication, computer and information, travel and business services with most of the Asian countries. Financial and government services are other areas where Pakistan holds comparative advantage over most of the trading partners. The study also used the ARDL approach on the data from 1980-2017 to explore the factors affecting the services trade. The results revealed that exchange rate positively impacts services exports in long run whereas export of services also increases with increase in communication services.