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The Discriminatory Effect of Domestic Regulations on International Services Trade

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Author Info

  • Matthieu Crozet
  • Emmanuel Milet
  • Daniel Mirza

Abstract

In order to develop trade in services, the GATS aims to eliminate progressively discriminatory regulations, which apply to foreign suppliers. This paper looks instead at the trade effect of domestic regulations, which apply to all firms indifferently and do not intend to exclude imports. We propose a theory-based empirical test to determine whether or not these domestic regulations affect more foreign suppliers than local ones, through the sign of their effect on the trade margins. We then apply it on French firm-level exports to OECD countries in professional services. Our econometric results show that domestic regulations in the importing markets do matter significantly for trade in services. They reduce both the decision to export and individual exports. A 10% percent increase in regulations reduces services export values by more than 7% and the probability of exporting with respect to that of not exporting by 2.8%. This result tends to prove that domestic regulations are discriminatory de facto even if they are not de jure.

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Bibliographic Info

Paper provided by CEPII research center in its series Working Papers with number 2012-02.

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Date of creation: Jan 2012
Date of revision:
Handle: RePEc:cii:cepidt:2012-02

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Related research

Keywords: Trade in services; Domestic Regulations; Firm Heterogeneity;

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References

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  1. Marc J. Melitz & Gianmarco I. P. Ottaviano, 2008. "Market Size, Trade, and Productivity," Review of Economic Studies, Oxford University Press, vol. 75(1), pages 295-316.
  2. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
  3. Cyrille Schwellnus, 2007. "The Effect of Domestic Regulation on Services Trade Revisited," Working Papers 2007-08, CEPII research center.
  4. Martin, Julien, 2012. "Markups, quality, and transport costs," European Economic Review, Elsevier, vol. 56(4), pages 777-791.
  5. Sébastien Jean & Giuseppe Nicoletti, 2004. "Regulation and Wage Premia," Working Papers 2004-12, CEPII research center.
  6. Markus Kelle & Jörn Kleinert, 2010. "German Firms in Service Trade," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 56(1), pages 51-72.
  7. Matthieu Crozet & Keith Head & Thierry Mayer, 2012. "Quality Sorting and Trade: Firm-level Evidence for French Wine," Review of Economic Studies, Oxford University Press, vol. 79(2), pages 609-644.
  8. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 791-819.
  9. Paul Conway & Giuseppe Nicoletti, 2006. "Product Market Regulation in the Non-Manufacturing Sectors of OECD Countries: Measurement and Highlights," OECD Economics Department Working Papers 530, OECD Publishing.
  10. Henk Kox & Hildegunn Kyvik Nordås, 2007. "Services Trade and Domestic Regulation," OECD Trade Policy Papers 49, OECD Publishing.
  11. Giuliano Conti & Alessia Lo Turco & Daniela Maggioni, 2010. "Exporters in Services: new Evidence from Italian Firms," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 56(1), pages 73-98.
  12. Henk Kox & Arjan Lejour, 2005. "Regulatory heterogeneity as obstacle for international services trade," CPB Discussion Paper 49, CPB Netherlands Bureau for Economic Policy Analysis.
  13. Julien Martin, 2009. "Spatial Price Discrimination in International Markets," Working Papers 2009-21, CEPII research center.
  14. McCallum, John, 1995. "National Borders Matter: Canada-U.S. Regional Trade Patterns," American Economic Review, American Economic Association, vol. 85(3), pages 615-23, June.
  15. Fukunari Kimura & Hyun-Hoon Lee, 2006. "The Gravity Equation in International Trade in Services," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(1), pages 92-121, April.
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Cited by:
  1. Vaillant, Marcel, 2012. "How to encourage network trade rules interconnections? an application to the case of non tariff barriers," MPRA Paper 47254, University Library of Munich, Germany, revised Jun 2012.
  2. Dincer, Nergiz & Tekin-Koru, Ayca, 2014. "A League of Their Own: Services Exporters within Goods Exporters," MPRA Paper 53294, University Library of Munich, Germany.

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