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Services Trade and Domestic Regulation

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  • Henk Kox
  • Hildegunn Kyvik Nordås

Abstract

This paper argues that regulatory measures affect the fixed cost of entering a market as well as the variable costs of servicing that market. Moreover, differences in regulation among countries often imply that firms have to incur entry costs in every new market. Indicators of regulatory intensity and heterogeneity are introduced in a gravity model and their impact on market entry and subsequent trade flows estimated for total services, business services and financial services. It is found that regulatory heterogeneity has a relatively large negative impact on both market entry and subsequent trade flows. Further, regulatory barriers have a negative effect on the local services sectors’ export performance. Finally it is found that regulations that aims at correcting market failure can have a positive impact on trade. It is concluded that services trade liberalization and regulatory reforms are complementary in creating competitive services markets.

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File URL: http://dx.doi.org/10.1787/154365452587
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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Trade Policy Papers with number 49.

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Date of creation: 14 Feb 2007
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Handle: RePEc:oec:traaab:49-en

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References

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  1. Stephen S. Golub, 2003. "Measures Of Restrictions on Inward Foreign Direct Investment for OECD Countries," OECD Economics Department Working Papers 357, OECD Publishing.
  2. Bernard, Andrew B. & Bradford Jensen, J., 1999. "Exceptional exporter performance: cause, effect, or both?," Journal of International Economics, Elsevier, vol. 47(1), pages 1-25, February.
  3. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2003. "Falling trade costs, heterogeneous firms and industry dynamics," LSE Research Online Documents on Economics 20027, London School of Economics and Political Science, LSE Library.
  4. Aaditya Mattoo & Pierre Sauve, 2003. "Domestic Regulation and Service Trade Liberalization," World Bank Publications, The World Bank, number 15081, October.
  5. 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.
  6. 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.
  7. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  8. Barth,James R. & Caprio,Gerard & Levine,Ross, 2008. "Rethinking Bank Regulation," Cambridge Books, Cambridge University Press, number 9780521709309, Fall.
  9. Henk Kox & Arjan Lejour, 2005. "Regulatory heterogeneity as obstacle for international services trade," CPB Discussion Paper 49, CPB Netherlands Bureau for Economic Policy Analysis.
  10. Philippa Dee & Kevin Hanslow, 2002. "Multilateral liberalisation of services trade," International Trade 0207002, EconWPA.
  11. Stephen S. Golub, 2003. "Measures of Restrictions on Inward Foreign Direct Investment for OECD Countries," OECD Economic Studies, OECD Publishing, vol. 2003(1), pages 85-116.
  12. Santos Silva, Joao & Tenreyro, Silvana, 2005. "The Log of Gravity," CEPR Discussion Papers 5311, C.E.P.R. Discussion Papers.
  13. repec:rus:hseeco:122439 is not listed on IDEAS
  14. Anthony Venables, 1994. "Integration and the export behaviour of firms: Trade costs, trade volumes and welfare," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(1), pages 118-132, March.
  15. Stephen S. Golub & Dana Hajkova & Daniel Mirza & Giuseppe Nicoletti & Kwang-Yeol Yoo, 2003. "The Influence of Policies on Trade and Foreign Direct Investment," OECD Economic Studies, OECD Publishing, vol. 2003(1), pages 7-83.
  16. 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.
  17. Rudolf Adlung, 2006. "Services Negotiations in the Doha Round: Lost in Flexibility?," Journal of International Economic Law, Oxford University Press, vol. 9(4), pages 865-893, December.
  18. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2006. "Trading Partners and Trading Volumes," DEGIT Conference Papers c011_022, DEGIT, Dynamics, Economic Growth, and International Trade.
  19. Sébastien Jean & Giuseppe Nicoletti, 2002. "Product Market Regulation and Wage Premia in Europe and North America: An Empirical Investigation," OECD Economics Department Working Papers 318, OECD Publishing.
  20. 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.
  21. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD Publishing.
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Citations

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Cited by:
  1. Erik van der Marel, 2011. "Determinants of comparative advantage in services," LSE Research Online Documents on Economics 38993, London School of Economics and Political Science, LSE Library.
  2. Matthieu Crozet & Emmanuel Milet & Daniel Mirza, 2013. "The Discriminatory Effect of Domestic Regulations on International Trade in Services: Evidence from Firm-Level Data," Documents de travail du Centre d'Economie de la Sorbonne 13019, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  3. repec:hal:journl:hal-00975560 is not listed on IDEAS
  4. Fontagné, Lionel & Mitaritonna, Cristina, 2013. "Assessing barriers to trade in the distribution and telecom sectors in emerging countries," World Trade Review, Cambridge University Press, vol. 12(01), pages 57-78, January.
  5. Erik van der Marel, 2012. "Determinants of Comparative Advantage in Services," FIW Working Paper series 087, FIW.
  6. Borchert, Ingo & Gootiiz, Batshur & Mattoo, Aaditya, 2012. "Policy barriers to international trade in services : evidence from a new database," Policy Research Working Paper Series 6109, The World Bank.
  7. Alexander Vogel, 2009. "Exporter Performance in the German Business Services Sector: First Evidence from the Services Statistics Panel," Working Paper Series in Economics 111, University of Lüneburg, Institute of Economics.
  8. Matthieu Crozet & Emmanuel Milet & Daniel Mirza, 2012. "The Discriminatory Effect of Domestic Regulations on International Services Trade," Working Papers 2012-02, CEPII research center.
  9. Erik Marel & Ben Shepherd, 2013. "Services Trade, Regulation and Regional Integration: Evidence from Sectoral Data," The World Economy, Wiley Blackwell, vol. 36(11), pages 1393-1405, November.
  10. Lionel Fontagné & Amélie Guillin & Cristina Mitaritonna, 2011. "Estimations of Tariff Equivalents for the Services Sectors," Working Papers 2011-24, CEPII research center.
  11. Matthieu Crozet & Emmanuel Milet & Daniel Mirza, 2013. "The Discriminatory Effect of Domestic Regulations on International Trade in Services: Evidence from Firm-Level Data," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00801398, HAL.
  12. Peter Havlik & Olga Pindyuk & Roman Stöllinger, 2009. "Trade in Goods and Services between the EU and the BRICs," wiiw Research Reports 357, The Vienna Institute for International Economic Studies, wiiw.
  13. Marine George, 2013. "Does cross-border regulation really influence cross-border trade? Evidence from the Services Trade Restrictions Index," Post-Print dumas-00909960, HAL.

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