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Services trade within Canada and the European Union; what do they have in common?

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  • Arjan Lejour

    ()

  • J.W. de Paiva Verheijden

Abstract

This paper explains bilateral services trade using a gravity equation and compares the results with trade in goods. We analyse bilateral trade between the provinces of Canada and between the member states of the European Union. We conclude that the gravity equation explains the variability in services trade very well: market size of the exporting and importing regions and distance are the most important explanatory variables. On average, distance is a less hindrance for services trade than for goods trade. Differences in languages and the regulation of product markets hamper services and goods trade in Europe significantly. Trade in services is also hampered by regulation in the importing country, but this is not true for goods. Services trade within Canada is twice as high as within Europe measured as share of GDP. Tentative estimates suggest that intra-EU services trade could be much higher if the internal market would function like the Canadian services market.

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Bibliographic Info

Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 42.

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Date of creation: Dec 2004
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Handle: RePEc:cpb:discus:42

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References

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  1. Mayer, Thierry & Zignago, Soledad, 2006. "Notes on CEPII’s distances measures," MPRA Paper 26469, University Library of Munich, Germany.
  2. Keith Head & Thierry Mayer, 2004. "Non-Europe : the magnitude and causes of market fragmentation in the EU," Cahiers de la Maison des Sciences Economiques bla99004a, Université Panthéon-Sorbonne (Paris 1).
  3. Henk Kox & Arjan Lejour, 2004. "A different approach to WTO negotiations in services," CPB Discussion Paper 36, CPB Netherlands Bureau for Economic Policy Analysis.
  4. Nahuis, Richard, 2004. "One size fits all?: Accession to the internal market; an industry-level assessment of EU enlargement," Journal of Policy Modeling, Elsevier, vol. 26(5), pages 571-586, July.
  5. Volker Nitsch, 2000. "National borders and international trade: evidence from the European Union," Canadian Journal of Economics, Canadian Economics Association, vol. 33(4), pages 1091-1105, November.
  6. Henri L. F. de Groot & Gert-Jan Linders & Piet Rietveld & Uma Subramanian, 2004. "The Institutional Determinants of Bilateral Trade Patterns," Kyklos, Wiley Blackwell, vol. 57(1), pages 103-123, 02.
  7. James E. Anderson & Eric van Wincoop, 2004. "Trade Costs," NBER Working Papers 10480, National Bureau of Economic Research, Inc.
  8. Thierry Mayer & Keith Head, 2002. "Illusory Border Effects: Distance Mismeasurement Inflates Estimates of Home Bias in Trade," Working Papers 2002-01, CEPII research center.
  9. John F. Helliwell, 1996. "Do National Borders Matter for Quebec's Trade?," NBER Working Papers 5215, National Bureau of Economic Research, Inc.
  10. John F. Helliwell & Geneviève Verdier, 2001. "Measuring internal trade distances: a new method applied to estimate provincial border effects in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 34(4), pages 1024-1041, November.
  11. 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.
  12. Holger C. Wolf, 1997. "Patterns of Intra- and Inter-State Trade," NBER Working Papers 5939, National Bureau of Economic Research, Inc.
  13. Henk Kox & Arjan Lejour & Raymond Montizaan, 2004. "The free movement of services within the EU," CPB Document 69, CPB Netherlands Bureau for Economic Policy Analysis.
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Citations

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Cited by:
  1. Van Der Marel, Erik & Shepherd, Ben, 2011. "Services trade, regulation, and regional integration: Evidence from sectoral data," MPRA Paper 34343, University Library of Munich, Germany.
  2. Keith Walsh, 2006. "Trade in Services: Does Gravity Hold? A Gravity Model Approach to Estimating Barriers to Services Trade," The Institute for International Integration Studies Discussion Paper Series iiisdp183, IIIS.
  3. Henk Kox & Arjan Lejour, 2005. "Regulatory heterogeneity as obstacle for international services trade," CPB Discussion Paper 49, CPB Netherlands Bureau for Economic Policy Analysis.
  4. Shingal, ANIRUDH, 2009. "How much do agreements matter for services trade?," MPRA Paper 32815, University Library of Munich, Germany, revised 15 May 2010.
  5. Erik van der Marel, 2012. "Determinants of Comparative Advantage in Services," FIW Working Paper series 087, FIW.
  6. Nadine Behncke, 2013. "Assessing the impact of European Integration on sectoral trade in services," FIW Working Paper series 109, FIW.
  7. Henk Kox & Arjan Lejour, 2006. "The Effects of the Services Directive on Intra-eu Trade and fdi," Revue économique, Presses de Sciences-Po, vol. 57(4), pages 747-769.
  8. Nora Dihel & Felix Eschenbach & Ben Shepherd, 2006. "South-South Services Trade," OECD Trade Policy Papers 39, OECD Publishing.

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