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indicator are from Guerrieri and Meliciani (2004) and are based on OECD Input/Output tables. In particular, we consider a vector measuring the use of FCB services on total value added for each manufacturing sector and, for each country, multiply it by total production in each manufacturing sector; this number is then divided by the country’s total production:

SMik =

WkjPij ∑∑Pijk j

j

k

i= country, j= manufacturing sector, k= service sector, P= production, W= weight given by the production of the service sector k used by the manufacturing sector j on the total production of the manufacturing sector j (taken from the I/O tables as an average across countries). Intuitively the indicator is higher for those countries that have a manufacturing industry that is more oriented towards those sectors that are, on average, high users of services.

Nominal data have been deflated and homogenized by means of the PPP OECD index.

B. Estimation Results

FIML estimation results of the continuous time parameters are reported in table 1. Point estimates of parameters are all significant at least at the 5% level and carry the expected sign (which is always positive with the exception of the two regulatory variables and geographical distance). We omit results of single country fixed effects as these have turned out to be insignificant. However two country group variables –beu and ceu – that turned out to be significant- are reported in the results. The term 't-ratio' denotes the ratio of a parameter estimate to the estimate of its asymptotic standard error, and does not imply that this ratio follows a Student's t-distribution. This ratio has an asymptotic normal distribution and so in a sufficiently large sample it is significantly different from zero at the 5 per cent level if it lies outside the interval +/- 1.96 and significantly different from zero at the one per cent level if it lies outside the interval +/-2.58.

We comment the estimation results by looking at each equation at the time. Results for Eq. (1) show that output is positively correlated with the stock of technology, the stock of capital and labor as well as with domestic and imported services. Note that the elasticities of the two components of services with respect to output are very similar (their difference is not significantly different from zero).

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