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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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  • Jesper Jensen
  • Thomas Rutherford
  • David Tarr

Abstract

In this paper a computable general equilibrium model of the Russian economy is used to assess the impact of accession to the World Trade Organization (WTO), which encompasses improved market access, Russian tariff reduction, and reduction of barriers against multinational service providers. It is assumed that foreign direct investment in business services is necessary for multinationals to compete well with Russian business services 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. It is estimated that Russia will gain about 7.2% of the value of Russian consumption in the medium term from WTO accession and up to 24% in the long run. It is also estimated that the largest gains to Russia will derive from liberalization of barriers against multinational service providers. Piecemeal and systematic sensitivity analysis shows that the results are robust.

Suggested Citation

  • Jesper Jensen & Thomas Rutherford & David Tarr, 2007. "The Impact of Liberalizing Barriers to Foreign Direct Investment in Services: The Case of Russian Accession to the World Trade Organization," Review of Development Economics, Wiley Blackwell, vol. 11(3), pages 482-506, August.
    • Handle: RePEc:bla:rdevec:v:11:y:2007:i:3:p:482-506
    DOI: 10.1111/j.1467-9361.2007.00362.x
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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