Linder hypothesis and India’s services trade

Abstract

This study examines the empirical validity of the Linder hypothesis for India’s service sector exports from 2005 to 2021, focusing on 35 major importing countries. We use a gravity model trade, applying Feasible Generalised Least Squares (FGLS) and two-step system generalised method of moments (GMM), incorporating country- and time-fixed effects. Our results confirm that the Linder hypothesis does not hold for Indian service exports, revealing an increase in trade intensity between countries with dissimilar income levels. The study finds that distance has a positive and significant impact on Indian service exports. Exchange rates have a negative and significant impact on India’s service exports, while the results for the RTA dummy variable are inconclusive. Sharing a common border, a common colony, and a language has a positive and significant effect on Indian service exports.

Keywords

• linder hypothesis
• service export
• gravity model
• india
• c33
• f12
• f14