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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. Barth,James R. & Caprio,Gerard & Levine,Ross, 2006. "Rethinking Bank Regulation," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521855761.
  2. Philippa Dee & Kevin Hanslow, 2002. "Multilateral liberalisation of services trade," International Trade, EconWPA 0207002, EconWPA.
  3. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2006. "Trading Partners and Trading Volumes," DEGIT Conference Papers, DEGIT, Dynamics, Economic Growth, and International Trade c011_022, DEGIT, Dynamics, Economic Growth, and International Trade.
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  6. Stephen S. Golub, 2003. "Measures of Restrictions on Inward Foreign Direct Investment for OECD Countries," OECD Economic Studies, OECD Publishing, OECD Publishing, vol. 2003(1), pages 85-116.
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  8. 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.
  9. Santos Silva, Joao & Tenreyro, Silvana, 2005. "The Log of Gravity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5311, C.E.P.R. Discussion Papers.
  10. Bernard, A., 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 97-21, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Henk Kox & Arjan Lejour & Raymond Montizaan, 2004. "The free movement of services within the EU," CPB Document, CPB Netherlands Bureau for Economic Policy Analysis 69, CPB Netherlands Bureau for Economic Policy Analysis.
  12. 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.
  13. Henk Kox & Arjan Lejour, 2005. "Regulatory heterogeneity as obstacle for international services trade," CPB Discussion Paper, CPB Netherlands Bureau for Economic Policy Analysis 49, CPB Netherlands Bureau for Economic Policy Analysis.
  14. Fukunari Kimura & Hyun-Hoon Lee, 2006. "The Gravity Equation in International Trade in Services," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 142(1), pages 92-121, April.
  15. Aaditya Mattoo & Pierre Sauve, 2003. "Domestic Regulation and Service Trade Liberalization," World Bank Publications, The World Bank, number 15081, August.
  16. Stephen S. Golub, 2003. "Measures Of Restrictions on Inward Foreign Direct Investment for OECD Countries," OECD Economics Department Working Papers 357, OECD Publishing.
  17. Rudolf Adlung, 2006. "Services Negotiations in the Doha Round: Lost in Flexibility?," Journal of International Economic Law, Oxford University Press, Oxford University Press, vol. 9(4), pages 865-893, December.
  18. Anthony Venables, 1994. "Integration and the export behaviour of firms: Trade costs, trade volumes and welfare," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 130(1), pages 118-132, March.
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  20. repec:rus:hseeco:122439 is not listed on IDEAS
  21. Henk Kox & Arjan Lejour, 2006. "The Effects of the Services Directive on Intra-eu Trade and fdi," Revue économique, Presses de Sciences-Po, Presses de Sciences-Po, vol. 57(4), pages 747-769.
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Citations

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Cited by:
  1. 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, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne 13019, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  2. 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.
  3. Lionel Fontagné & Cristina Mitaritonna, 2013. "Assessing Barriers to Trade in the Distribution and Telecom Sectors in Emerging Countries," PSE - Labex "OSE-Ouvrir la Science Economique", HAL hal-00975560, HAL.
  4. 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.
  5. repec:hal:journl:hal-00975560 is not listed on IDEAS
  6. Marine George, 2013. "Does cross-border regulation really influence cross-border trade? Evidence from the Services Trade Restrictions Index," Post-Print, HAL dumas-00909960, HAL.
  7. Lionel Fontagné & Amélie Guillin & Cristina Mitaritonna, 2011. "Estimations of Tariff Equivalents for the Services Sectors," Working Papers 2011-24, CEPII research center.
  8. 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.
  9. Erik van der Marel, 2012. "Determinants of Comparative Advantage in Services," FIW Working Paper series, FIW 087, FIW.
  10. Alexander Vogel, 2009. "Exporter Performance in the German Business Services Sector: First Evidence from the Services Statistics Panel," Working Paper Series in Economics, University of Lüneburg, Institute of Economics 111, University of Lüneburg, Institute of Economics.
  11. Erik van der Marel, 2011. "Determinants of comparative advantage in services," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 38993, London School of Economics and Political Science, LSE Library.
  12. Matthieu Crozet & Emmanuel Milet & Daniel Mirza, 2012. "The Discriminatory Effect of Domestic Regulations on International Services Trade," Working Papers 2012-02, CEPII research center.

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