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Dynamic effects of European services liberalisation: more to be gained

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  • Kox, Henk L.M.
  • Lejour, Arjan

Abstract

Europe’s market for services is fragmented by many regulatory barriers. The Services directive proposed by the European Commission aims to integrate national services markets by reducing these barriers. Several studies indicate that bilateral trade and foreign direct investment in services could boost substantially. GDP and consumption could increase by 0.5% to about 1% on average in Europe. The effects for the Member States vary depending on the size of the barriers in their services markets and specialization. These results take account of scale effects, and forward and backward linkages in the economy, but ignore the effects of more competition on productivity and innovation in the long term. This paper assesses the channels though which an integrated European services market may generate these dynamic gains. Improved market access will stimulate competitive selection and productivity growth. Through trade and investment, knowledge spillovers will increase and innovation will be fostered. These channels are illustrated with quantitative evidence.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3751.

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Date of creation: Sep 2006
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Handle: RePEc:pra:mprapa:3751

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Keywords: trade openess; services; dynamic effects; European Union;

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References

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  1. repec:rus:hseeco:122439 is not listed on IDEAS
  2. Kox, Henk L.M. & Leeuwen, George van & Wiel, Henry van der, 2007. "Market structure, productivity and scale in European business services," MPRA Paper, University Library of Munich, Germany 6137, University Library of Munich, Germany.
  3. Philippe Aghion & Nicholas Bloom & Richard Blundell & Rachel Griffith & Peter Howitt, 2002. "Competition and Innovation: An Inverted U Relationship," NBER Working Papers, National Bureau of Economic Research, Inc 9269, National Bureau of Economic Research, Inc.
  4. Rachel Griffith & Stephen Redding & Helen Simpson, 2004. "Foreign Ownership and Productivity: New Evidence from the Service Sector and the R&D Lab," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 20(3), pages 440-456, Autumn.
  5. Elhanan Helpman & Marc J. Melitz & Stephen R. Yeaple, 2004. "Export Versus FDI with Heterogeneous Firms," American Economic Review, American Economic Association, American Economic Association, vol. 94(1), pages 300-316, March.
  6. Carl Davidson & Steven J. Matusz, 2006. "Trade Liberalization And Compensation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 723-747, 08.
  7. Nickell, Stephen J, 1996. "Competition and Corporate Performance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 104(4), pages 724-46, August.
  8. Richard Baldwin, 2005. "Heterogeneous Firms and Trade: Testable and Untestable Properties of the Melitz Model," NBER Working Papers, National Bureau of Economic Research, Inc 11471, National Bureau of Economic Research, Inc.
  9. Cavelaars, Paul, 2006. "Output and price effects of enhancing services sector competition in a large open economy," European Economic Review, Elsevier, Elsevier, vol. 50(5), pages 1131-1149, July.
  10. Line Vogt, 2005. "The EU's Single Market: At Your Service?," OECD Economics Department Working Papers, OECD Publishing 449, OECD Publishing.
  11. 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.
  12. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers, National Bureau of Economic Research, Inc 8881, National Bureau of Economic Research, Inc.
  13. Arjan Lejour & Henk Kox & Roland de Bruijn, 2006. "The trade-induced effects of the Services Directive and the country of origin principle," CPB Document, CPB Netherlands Bureau for Economic Policy Analysis 108, CPB Netherlands Bureau for Economic Policy Analysis.
  14. 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.
  15. Stefano Scarpetta & Philip Hemmings & Thierry Tressel & Jaejoon Woo, 2002. "The Role of Policy and Institutions for Productivity and Firm Dynamics: Evidence from Micro and Industry Data," OECD Economics Department Working Papers, OECD Publishing 329, OECD Publishing.
  16. Frankel, Jeffrey & Rose, Andrew K., 2001. "An Estimate of the Effect of Common Currencies on Trade and Income," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp01-013, Harvard University, John F. Kennedy School of Government.
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Cited by:
  1. Tingsong Jiang & Warwick McKibbin, 2008. "What Does A Free Trade Area Of The Asia-Pacific Mean To China," CAMA Working Papers, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University 2008-10, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  2. Paul-Bogdan Zamfir, 2013. "Romania Alignment To Eu Requirements Concerning The Services Integration In The Internal Market," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, Constantin Brancusi University, Faculty of Economics, vol. 2, pages 329-334, April.
  3. Bianka Dettmer, 2012. "The European Union's service directive: Contrasting ex ante estimates with empirical evidence," Jena Economic Research Papers, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics 2012-019, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  4. Fabienne Ilzkovitz & Adriaan Dierx & Viktoria Kovacs & Nuno Sousa, 2007. "Steps towards a deeper economic integration: the internal market in the 21st century," European Economy - Economic Papers, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission 271, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.

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