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This paper investigates whether and how institutions moderate the effect of services trade policy at the firm level. The analysis considers services liberalization in Italy and exploits the wide heterogeneity in institutional quality across Italian provinces. We distinguish between national-level services trade policy, which reduces entry barriers in services sectors, and firmspecific policy treatment, which captures the reduction in trade restrictions for services used as intermediate inputs in the firm. We find that services liberalization increases productivity of manufacturing firms located in provinces with sufficiently high quality institutions, proxied by the speed of civil proceeding.