The Impact of Digital Trade Rules on Services Trade: An Empirical Investigation from the <scp>DVA</scp> Perspective

ABSTRACT This paper explores the characteristics and trends of services trade from the perspective of domestic value added (DVA) and examines the impact of digital trade rules on it using bilateral sector‐level panel data among 64 economies from 1996 to 2018. Our research reveals distinct trends of expansion, densification, and de‐modularization of the international services trade relations among economies. Furthermore, leading services exporters basically maintain their dominant positions, demonstrating a clear first‐mover advantage. We then investigated the impact of digital trade rules on the DVA of services trade using multiple empirical methods, which consistently show that the impact is positive. Based on the text analysis method, we find that improving the broadness and depth of digital trade rules can both enhance the DVA of services trade. Finally, the impact of digital trade rules on the DVA of services trade demonstrates heterogeneity, depending on sectoral, economy‐specific, and agreement‐specific characteristics.