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The Division and Size of Gains from Liberalization of Service Networks

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  • Keshab Bhattarai
  • John Whalley

Abstract

This paper emphasizes the different nature of cross border liberalization in network related services, such as telecoms, compared to liberalization in goods. In the presence of network externalities, it argues that if two disjoint country service networks involving a small and large country are connected as part of international liberalization, 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. Benefits of liberalization in network related serv ices, unlike goods, 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 from 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. An empirical implementation of global telecoms liberalization for the US, Europe, Canada, and the Rest of the World using the framework developed in the paper shows larger gains to larger regions, consistent with the theme of the paper that goods and services liberalization differ.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6712.

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Date of creation: Aug 1998
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Publication status: published as Bhattarai, Keshab and John Whalley. "The Division And Size Of Gains From Liberalization In Service Networks," Review of International Economics, 2006, v14(3,Aug), 348-361.
Handle: RePEc:nbr:nberwo:6712

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  1. Nicholas Economides, 1997. "The Economics of Networks," Industrial Organization, EconWPA 9701002, EconWPA.
  2. Economides, Nicholas, 1996. "Network externalities, complementarities, and invitations to enter," European Journal of Political Economy, Elsevier, Elsevier, vol. 12(2), pages 211-233, September.
  3. Choi, J.P., 1991. "Network Externality, Compatibility Choice, and Planned Obsolescence," Discussion Papers, Columbia University, Department of Economics 1991_67, Columbia University, Department of Economics.
  4. Katz, Michael L & Shapiro, Carl, 1986. "Technology Adoption in the Presence of Network Externalities," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(4), pages 822-41, August.
  5. S. J. Liebowitz & Stephen E. Margolis, 1994. "Network Externality: An Uncommon Tragedy," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 8(2), pages 133-150, Spring.
  6. repec:fth:coluec:564 is not listed on IDEAS
  7. Melvin, James R, 1989. "Trade in Producer Services: A Heckscher-Ohlin Approach," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(5), pages 1180-96, October.
  8. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, American Economic Association, vol. 75(3), pages 424-40, June.
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Cited by:
  1. John Whalley, 2008. "Globalisation and Values," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 31(11), pages 1503-1524, November.
  2. Manish Pandey & John Whalley, 2004. "Social Networks and Trade Liberalization," NBER Working Papers 10769, National Bureau of Economic Research, Inc.
  3. 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.
  4. Ajitava Raychaudhuri & Prabir De, 2007. "Assessing Barriers to Trade in Education Services in Developing Asia - Pacific Countries:An Empirical Exercise," Working Papers, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada. 3407, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
  5. John Whalley, 2004. "Assessing the Benefits to Developing Countries of Liberalisation in Services Trade," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 27(8), pages 1223-1253, 08.
  6. Bhattarai K., 2001. "Welfare Gains to UK from a Global Free Trade," European Research Studies Journal, European Research Studies Journal, European Research Studies Journal, vol. 0(3-4), pages 55-72, July - De.

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