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The paper examines the role of service inputs in shaping the competitiveness of the manufacturing sector. It first estimates an export market share function of 18 manufacturing industries for 16 OECD countries over the period 1995 to 2000. The service linkage variables are derived from Input Output tables. The results point to a positive and highly significant impact of international service linkages in high skilled, technology driven industries that explains about 40 percent of the overall increase in the market share. The second part of the paper estimates the impact of outsourced services as well as in house services on total factor productivity growth in Austrian manufacturing, based on an approach suggested by Feenstra Hanson (1999).
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