This paper emphasizes the different nature of cross border liberalization in network related services, such as telcoms, compared to liberalization in goods. In the presence of network externalities, it argues that if two disjoint country service networks involving a small and large country are connected as part of international liberalization, the per capita gain for the small country from access to a large network will be large, and the per capita gain for the large country will be small. Benefits of liberalization in network related services, unlike goods, are more likely to be approximately equally divided between large and small countries than is true of trade in goods, where benefits accrue disproportionately to the small country. We also argue that non-cooperation in network related services trade may involve more extreme retaliation than suggested for trade in goods from the optimal tariff literature, so that relative to a non- cooperative outcome, gains from liberalization in network related services become larger than from liberalization in goods. An empirical implementation of global telcoms liberalization for the US, Europe, Canada and the Rest of the World using the framework developed in the paper shows larger gains to larger regions, consistent with the theme of the paper that goods and services liberalization differ.
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Paper provided by Centre for the Study of Globalisation and Regionalisation (CSGR), University of Warwick in its series CSGR Working papers series with number
03/98.
Length: Date of creation: Mar 1998 Date of revision: Handle: RePEc:wck:wckewp:03/98
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Find related papers by JEL classification: D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models D62 - Microeconomics - - Welfare Economics - - - Externalities F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Nicholas Economides, 1995.
"The Economics of Networks,"
Working Papers
94-24, New York University, Leonard N. Stern School of Business, Department of Economics, revised Sep 1995.
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