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Landlocked or policy locked ? how services trade protection deepens economic isolation

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Author Info

  • Borchert, Ingo
  • Gootiiz, Batshur
  • Grover, Arti
  • Mattoo, Aaditya

Abstract

A new cross-country database on services policy reveals a perverse pattern: many landlocked countries restrict trade in the very services that connect them with the rest of the world. On average, telecommunications and air-transport policies are significantly more restrictive in landlocked countries than elsewhere. The phenomenon is most starkly visible in Sub-Saharan Africa and is associated with lower levels of political accountability. This paper finds evidence that these policies lead to more concentrated market structures and more limited access to services than these countries would otherwise have, even after taking into account the influence of geography and incomes, and the possibility that policy is endogenous. Even moderate liberalization in these sectors could lead to an increase of cellular subscriptions by 7 percentage points and a 20-percent increase in the number of flights. Policies in other countries, industrial and developing alike, also limit competition in international transport services. Hence,"trade-facilitating"investments under various"aid-for-trade"initiatives are likely to earn a low return unless they are accompanied by meaningful reform in these services sectors.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5942.

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Date of creation: 01 Jan 2012
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Handle: RePEc:wbk:wbrwps:5942

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Related research

Keywords: Transport Economics Policy&Planning; Markets and Market Access; Public Sector Corruption&Anticorruption Measures; Economic Theory&Research; ICT Policy and Strategies;

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References

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  1. Joseph F. Francois & Miriam Manchin, 2007. "Institutions, infrastructure, and trade," Economics working papers 2007-05, Department of Economics, Johannes Kepler University Linz, Austria.
  2. Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2006. "Estimating trade restrictiveness indices," Policy Research Working Paper Series 3840, The World Bank.
  3. Jingang Zhao, 2009. "Necessary and sufficient conditions for the optimal number of firms," Journal of Economics, Springer, vol. 98(3), pages 235-246, December.
  4. Olivier Boylaud & Giuseppe Nicoletti, 2001. "Regulation, market structure and performance in telecommunications," OECD Economic Studies, OECD Publishing, vol. 2001(1), pages 99-142.
  5. Mohamed Ali Marouani & Laura Munro, 2009. "Assessing Barriers to Trade in Services in the MENA Region," OECD Trade Policy Papers 84, OECD Publishing.
  6. Carsten Fink & Aaditya Mattoo & Ileana Cristina Neagu, 2002. "Trade in International Maritime Services: How Much Does Policy Matter?," World Bank Economic Review, World Bank Group, vol. 16(1), pages 81-108, June.
  7. Gual Jordi & Trillas Francesc, 2006. "Telecommunications Policies: Measurement and Determinants," Review of Network Economics, De Gruyter, vol. 5(2), pages 1-24, June.
  8. Calì, Massimiliano & te Velde, Dirk Willem, 2011. "Does Aid for Trade Really Improve Trade Performance?," World Development, Elsevier, vol. 39(5), pages 725-740, May.
  9. Gasmi, Farid & Recuero Virto, Laura, 2009. "The Determinants and Impact of Telecommunications Reforms in Developing Countries," TSE Working Papers 09-092, Toulouse School of Economics (TSE).
  10. Nora Dihel & Ben Shepherd, 2007. "Modal Estimates of Services Barriers," OECD Trade Policy Papers 51, OECD Publishing.
  11. Ioannis Kessides & Li Tang, 2010. "Sunk Costs, Market Contestability, and the Size Distribution of Firms," Review of Industrial Organization, Springer, vol. 37(3), pages 215-236, November.
  12. Fink, Carsten & Mattoo, Aaditya & Rathindran, Randeep, 2002. "An assessment of telecommunications reform in developing countries," Policy Research Working Paper Series 2909, The World Bank.
  13. Geloso Grosso, Massimo & Shepherd, Ben, 2009. "Liberalizing air cargo services in APEC," MPRA Paper 17781, University Library of Munich, Germany.
  14. Gawande, Kishore & Krishna, Pravin & Olarreaga, Marcelo, 2009. "What Governments Maximize and Why: The View from Trade," International Organization, Cambridge University Press, vol. 63(03), pages 491-532, July.
  15. Devashish Mitra & Dimitrios D. Thomakos & Mehmet A. Ulubaşoglu, 2002. ""Protection For Sale" In A Developing Country: Democracy Vs. Dictatorship," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 497-508, August.
  16. Farid Gasmi & Paul Noumba Um & Laura Recuero Virto, 2009. "Political Accountability and Regulatory Performance in Infrastructure Industries: An Empirical Analysis," World Bank Economic Review, World Bank Group, vol. 23(3), pages 509-531, October.
  17. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
  18. Jean-Jacques Hallaert & Ricardo Cavazos Cepeda & Gimin Kang, 2011. "Estimating the Constraints to Trade of Developing Countries," OECD Trade Policy Papers 116, OECD Publishing.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Being landlocked and making it worse
    by Economic Logician in Economic Logic on 2012-02-07 15:12:00
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Cited by:
  1. Arvis, Jean-François & Duval, Yann & Shepherd, Ben & Utoktham,Chorthip, 2013. "Trade costs in the developing world : 1995 - 2010," Policy Research Working Paper Series 6309, The World Bank.
  2. Arvind Subramanian & Martin Kessler, 2013. "The Hyperglobalization of Trade and Its Future," Working Paper Series WP13-7, Peterson Institute for International Economics.
  3. Olivier CADOT & Ana FERNANDES & Julien GOURDON & Aaditya MATTOO & Jaime de MELO, 2013. "Evaluating Aid for Trade : A Survey of Recent Studies," Working Papers P75, FERDI.
  4. 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.

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  1. Economic Logic blog

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