The Division and Size of Gains from Liberalization in Service Networks

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The Division and Size of Gains from Liberalization in Service Networks

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Keshab Bhattarai
John Whalley

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Abstract

If two disjoint country service networks involving a small and large country are connected as part of international liberalization in the presence of network externalities, the per capita gain for the small country from access to a large network will be large, and the per capita gain for the large country will be small. In contrast to goods, the benefits of liberalization in network-related services are more likely to be approximately equally divided between large and small countries than is true of trade in goods, where benefits accrue disproportionately to the small country. We also argue that non-cooperation in network-related services trade may involve more extreme retaliation than suggested for trade in goods by the optimal tariff literature, so that relative to a non-cooperative outcome, gains from liberalization in network-related services become larger than from liberalization in goods. We develop simple models which we use for numerical examples showing these points, along with an empirical implementation for global telecoms liberalization for the US, Europe, Canada, and the rest of the world using the framework developed in the paper. This shows similar proportional gains to regions, consistent with the theme of the paper that goods and services liberalization differ. Copyright © 2006 The Authors; Journal compilation © 2006 Blackwell Publishing Ltd.

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Article provided by Blackwell Publishing in its journal Review of International Economics.

Volume (Year): 14 (2006)
Issue (Month): 3 (08)
Pages: 348-361
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Handle: RePEc:bla:reviec:v:14:y:2006:i:3:p:348-361

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Paper
- Bhattarai, Keshab & John Whalley, 1998. "The Division and Size of Gains from Liberalization in Service Networks," CSGR Working papers series 03/98, Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick.
- Keshab Bhattarai & John Whalley, 1998. "The Division and Size of Gains from Liberalization of Service Networks," NBER Working Papers 6712, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Choi, Jay Pil, 1994. "Network Externality, Compatibility Choice, and Planned Obsolescence," Journal of Industrial Economics, Blackwell Publishing, vol. 42(2), pages 167-82, June. [Downloadable!] (restricted)
Other versions:
- Choi, J.P., 1991. "Network Externality, Compatibility Choice, and Planned Obsolescence," Discussion Papers 1991_67, Columbia University, Department of Economics.
Liebowitz, S J & Margolis, Stephen E, 1994. "Network Externality: An Uncommon Tragedy," Journal of Economic Perspectives, American Economic Association, vol. 8(2), pages 133-50, Spring. [Downloadable!] (restricted)
Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-40, June. [Downloadable!] (restricted)
repec:fth:coluec:564 is not listed on IDEAS
Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 822-41, August. [Downloadable!] (restricted)
Economides, Nicholas, 1996. "The economics of networks," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 673-699, October. [Downloadable!] (restricted)
Other versions:
- Nicholas Economides, 1997. "The Economics of Networks," Industrial Organization 9701002, EconWPA. [Downloadable!]
- Nicholas Economides, 1995. "The Economics of Networks," Working Papers 94-24, New York University, Leonard N. Stern School of Business, Department of Economics, revised Sep 1995. [Downloadable!]
- Nicholas Economides, 1997. "The Economics of Networks," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 1(0), December. [Downloadable!]
Economides, Nicholas, 1996. "Network externalities, complementarities, and invitations to enter," European Journal of Political Economy, Elsevier, vol. 12(2), pages 211-233, September. [Downloadable!] (restricted)
Other versions:
- Nicholas Economides, 1997. "Network Externalities, Complementarities, and Invitations to Enter," Industrial Organization 9701004, EconWPA. [Downloadable!]
Melvin, James R, 1989. "Trade in Producer Services: A Heckscher-Ohlin Approach," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1180-96, October. [Downloadable!] (restricted)

Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Ajitava Raychaudhuri & Prabir De, 2007. "Assessing Barriers to Trade in Education Services in Developing Asia - Pacific Countries:An Empirical Exercise," Working Papers 3407, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada.. [Downloadable!]
John Whalley, 2003. "Assessing the Benefits to Developing Countries of Liberalization in Services Trade," NBER Working Papers 10181, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Other versions:
- John Whalley, 2004. "Assessing the Benefits to Developing Countries of Liberalisation in Services Trade," The World Economy, Blackwell Publishing, vol. 27(8), pages 1223-1253, 08. [Downloadable!] (restricted)
John Whalley, 2003. "Liberalization in China's Key Service Sectors Following WTO Accession: Some Scenarios and Issues of Measurement," NBER Working Papers 10143, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Manish Pandey & John Whalley, 2004. "Social Networks and Trade Liberalization," NBER Working Papers 10769, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)

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