Abstract
Economic diversification and addressing challenges of non-oil producers are a common policy goal in many resource-exporting countries. This study’s contribution is in drawing policy makers’ attention to intermediate services, i.e., services used by firms together with other inputs in their production process. These services are increasingly important for enhancing manufacturing exports and productivity, as well as earning direct export revenues. Yet, there is limited research on how the intermediate service market performs in countries with large extractive industries. To understand complex dynamics between the resource and service sectors, we rely on the evidence from Kazakhstan, a large petroleum producer. Using panel data analysis, we find that, due to the very high service intensity of petroleum production, rising petroleum output leads to higher intermediate service prices and lower intermediate service output purchased by non-oil producers. To mitigate the oil boom’s crowding out of non-oil producers from the service market, we recommend service sector diversification policies.
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Notes
TiVA database and its use in analyzing international trade of extractive industries are discussed in Atakhanova and Howie (2020).
This unemployment rate is likely to be understated due to the large number of those workers who were engaged in subsistence farming in 2001 and were not officially considered unemployed (Howie and Atakhanova 2014).
At the time of development of this model, most services were final services and they were not part of international trade.
Price data set for intermediate services includes the following service products: architecture, engineering, technical testing, and analysis; employment services; information services; legal and accounting services; management services and services of company headquarters; marketing services; other administrative, office, and auxiliary services; other professional, scientific, and technical services; post; real-estate services; rental services; research and development; security and investigation services; buildings and grounds maintenance; telecommunication; and transportation.
Price dataset for final services includes the following service products: art and entertainment; education; gambling; health care and social services; hospitality and catering; production of cinema, video, television, audio, and music programs; public administration, defense, and social welfare; publishing; radio and TV broadcasting; repairs of computers and other consumer products; services of libraries, museums, and similar entities; sports and recreation; veterinary services; and other personal services.
Data on output of the following service industries are reported by the Kazakhstan’s input–output tables compiled by the Ministry of Economy of Kazakhstan: wholesale and retail trade of automobiles, motorcycles, and their repairs; wholesale trade except involving automobiles and motorcycles; retail trade except involving automobiles and motorcycles; land and pipeline transportation; water transportation; air transportation; warehousing and auxiliary transport services; post and courier services; hospitality services; catering services; information services; communication; financial services except services of insurance and pension funds; insurance, re-insurance, and pension funds, except mandatory social insurance; auxiliary finance and insurance services; real-estate services; professional, technical, and scientific activity; administrative and auxiliary services; public administration and defense, mandatory social services; education; health care; social services; art, entertainment, and recreation; and other services.
Kazakhstan joined WTO in 2015 and committed to phased-in liberalization of service markets including financial, telecommunication, and energy services.
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Atakhanova, Z. Kazakhstan’s oil boom, diversification strategies, and the service sector. Miner Econ 34, 399–409 (2021). https://doi.org/10.1007/s13563-021-00275-2
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DOI: https://doi.org/10.1007/s13563-021-00275-2