Linking local services to global manufactures*

Abstract

We assess how global shocks propagate from global manufacturing firms to local service providers through a spatial variation in export-driven service demand. We show that a 1 percent increase in a localized measure of exporting increases sales of service firms by around 0.08 percent. We also show that this link is local as the effect fades away after just 20 km, that it is more pronounced with larger and foreign-owned service firms, and that the impact extends beyond sales as it also increases employment as well as productivity in local service plants and it also make them less likely to move.