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The welfare implications of services liberalization in a developing country

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  • Jouini, Nizar
  • Rebei, Nooman

Abstract

We propose an integrated method based on a two-sector small open economy dynamic and stochastic general equilibrium model to estimate non-tariff barriers and quantify the impact of services liberalization. The major component of trade barriers is explicitly modeled through the introduction of entry-sunk costs. Hence, liberalization is treated assuming a government's policy decision aimed at reducing those costs. Then, we estimate the model using Bayesian techniques for Tunisia and the Euro Area. The paper presents a precise quantitative evaluation of services trade barriers as the difference between entry-sunk costs in Tunisia versus the Euro Area. We find significant welfare benefits in addition to aggregate and sectoral growth gains the Tunisian economy could attain following services liberalization. Surprisingly, the good sector is the one that benefits the most from services liberalization in the short- and long-term horizons.

Suggested Citation

  • Jouini, Nizar & Rebei, Nooman, 2014. "The welfare implications of services liberalization in a developing country," Journal of Development Economics, Elsevier, vol. 106(C), pages 1-14.
    • Handle: RePEc:eee:deveco:v:106:y:2014:i:c:p:1-14
    DOI: 10.1016/j.jdeveco.2013.07.016
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    Cited by:

    1. Abdelli Soulaima, 2014. "A Welfare Based Approach for choosing the Inflation Targeting and the Exchange Regime in Tunisia," Journal of Economics and Behavioral Studies, AMH International, vol. 6(12), pages 919-932.
    2. Hayakawa, Kazunobu & Mukunoki, Hiroshi & Yang, Chih-hai, 2020. "Liberalization for services FDI and export quality: Evidence from China," Journal of the Japanese and International Economies, Elsevier, vol. 55(C).
    3. Estrades, Carmen & Traore, Fousseini & Djiofack Zebaze, Calvin & Cardozo, Adriana, 2015. "DR-CAFTA Agreement and liberalization of trade in services: Evidence from Costa Rica," Conference papers 332581, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    4. Moez Ben Hassine & Mr. Nooman Rebei, 2019. "Informality, Frictions, and Macroprudential Policy," IMF Working Papers 2019/255, International Monetary Fund.
    5. Kawther Alimi & Mohamed Chakroun, 2022. "Wage Rigidity Impacts on Unemployment and Inflation Persistence in Tunisia: Evidence from an Estimated DSGE Model," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(1), pages 474-500, March.

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    More about this item

    Keywords

    Liberalization; Trade in services and goods; General equilibrium; Bayesian estimation; Tunisia;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • F1 - International Economics - - Trade
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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