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The impact of liberalizing barriers to foreign direct investment in services - the case of Russian accession to the World Trade Organization

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  • Jensen, Jesper
  • Rutherford, Thomas
  • Tarr, David

Abstract

The authors use a computable general equilibrium model of the Russian economy to assess the impact of accession to the World Trade Organization (WTO), which encompasses improved market access, tariff reduction, and reduction of barriers against multinational service providers. They assume that foreign direct investment in business services is necessary for multinationals to compete well with Russian business service providers, but cross-border service provision is also present. The model incorporates productivity effects in both goods and services markets endogenously through a Dixit-Stiglitz framework. As a result, the estimated gains from WTO accession are much larger than would be obtained from a typical model with perfect competition. The ad valorem equivalent of barriers to foreign direct investment have been estimated based on detailed questionnaires completed by specialized research institutes in Russia. The authors estimate that Russia will gain about 7.2 percent of the value of Russian consumption in the medium run from WTO accession and up to 24 percent in the long run. They estimate that the largest gains to Russia will derive from liberalization of barriers againstmultinational service providers. Piecemeal and systematic sensitivity analysis shows that their results are robust.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3391.

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Date of creation: 01 Sep 2004
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Handle: RePEc:wbk:wbrwps:3391

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Keywords: Environmental Economics&Policies; International Terrorism&Counterterrorism; Decentralization; Economic Theory&Research; Banks&Banking Reform; Environmental Economics&Policies; Economic Theory&Research; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Banks&Banking Reform; ICT Policy and Strategies;

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  1. Thomas F. Rutherford & David G. Tarr, 2003. "Regional Trading Arrangements for Chile: do the Results Differ with a Dynamic Model?," Economie Internationale, CEPII research center, issue 94-95, pages 261-281.
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