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Modeling Services Liberalization: The Case of Tanzania


  • G. Tarr, David

    () (The World Bank)

  • F. Rutherford, Thomas

    (The Swiss Federal Institute of Technology)


Despite economic theory and empirical literature that have shown that wide availability of business services contributes significantly to productivity gains and growth, economic modelers have been slow to meaningfully incorporate services into their models. This paper employs a 52-sector, small, open-economy computable general equilibrium model of the Tanzanian economy to assess the impact of the liberalization of regulatory barriers against foreign and domestic business service providers in Tanzania. The model incorporates foreign direct investment in services, and productivity effects in both goods and services markets endogenously through a Dixit-Stiglitz framework. The paper summarizes and builds on the surveys and policy notes of the regulatory regimes in business services in Tanzania, and estimates the ad valorem equivalent of barriers to foreign direct investment. The paper estimates significant gains to Tanzania from services reforms, especially in banking, maritime and road transportation.Decomposition exercises reveal that the largest gains will derive from liberalization of non-discriminatory regulatory barriers.

Suggested Citation

  • G. Tarr, David & F. Rutherford, Thomas, 2010. "Modeling Services Liberalization: The Case of Tanzania," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 25, pages 644-675.
  • Handle: RePEc:ris:integr:0520

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    References listed on IDEAS

    1. Philippa Dee & Kevin Hanslow & Tiem Phamduc, 2003. "Measuring the Cost of Barriers to Trade in Services," NBER Chapters,in: Trade in Services in the Asia Pacific Region, NBER East Asia Seminar on Economics (EASE), Volume 11, pages 11-46 National Bureau of Economic Research, Inc.
    2. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    3. Jesper Jensen & Thomas Rutherford & David Tarr, 2014. "The Impact of Liberalizing Barriers to Foreign Direct Investment in Services: The Case of Russian Accession to the World Trade Organization," World Scientific Book Chapters,in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 6, pages 125-149 World Scientific Publishing Co. Pte. Ltd..
    4. Romer, Paul, 1994. "New goods, old theory, and the welfare costs of trade restrictions," Journal of Development Economics, Elsevier, vol. 43(1), pages 5-38, February.
    5. Hansen, Terje & Koopmans, Tjalling C., 1972. "On the definition and computation of a capital stock invariant under optimization," Journal of Economic Theory, Elsevier, vol. 5(3), pages 487-523, December.
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    Cited by:

    1. Christen, Elisabeth & Francois, Joseph & Hoekman, Bernard, 2012. "CGE modeling of market access in services," Policy Research Working Paper Series 6106, The World Bank.
    2. Jaime DE MELO & Yvonne TSIKATA, 2014. "Regional integration in Africa: Challenges and prospects," Working Papers P93, FERDI.
    3. Bernard Hoekman, 2017. "Trade in services: Opening markets to create opportunities," WIDER Working Paper Series 031, World Institute for Development Economic Research (UNU-WIDER).
    4. Elena Ianchovichina & Maros Ivanic, 2016. "Economic Effects of the Syrian War and the Spread of the Islamic State on the Levant," The World Economy, Wiley Blackwell, vol. 39(10), pages 1584-1627, October.
    5. World Bank, 2012. "Kazakhstan : Assessment of Costs and Benefits of the Customs," World Bank Other Operational Studies 12299, The World Bank.
    6. Latorre, Maria C., 2014. "CGE analysis of the impact of foreign direct investment and tariff reform on female and male wages," Policy Research Working Paper Series 7073, The World Bank.
    7. Jesper Jensen & David Tarr, 2014. "Deep Trade Policy Options for Armenia: The Importance of Trade Facilitation, Services and Standards Liberalization," World Scientific Book Chapters,in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 19, pages 453-508 World Scientific Publishing Co. Pte. Ltd..
    8. World Bank, 2012. "Assessment of Costs and Benefits of the Customs Union for Kazakhstan," World Bank Other Operational Studies 2722, The World Bank.
    9. Edward J. Balistreri & Maryla Maliszewska & Israel Osorio-Rodarte & David G. Tarr & Hidemichi Yonezawa, 2016. "Poverty and Shared Prosperity Implications of Reducing Trade Costs Through Deep Integration in Eastern and Southern Africa," Working Papers 2016-07, Colorado School of Mines, Division of Economics and Business.
    10. Latorre, María C., 2016. "A CGE Analysis of the Impact of Foreign Direct Investment and Tariff Reform on Female and Male Workers in Tanzania," World Development, Elsevier, vol. 77(C), pages 346-366.
    11. repec:bla:worlde:v:40:y:2017:i:12:p:2564-2591 is not listed on IDEAS
    12. Tarr, David G., 2013. "Putting Services and Foreign Direct Investment with Endogenous Productivity Effects in Computable General Equilibrium Models," Handbook of Computable General Equilibrium Modeling, Elsevier.
    13. Edward J. Balistreri & David G. Tarr & Hidemichi Yonezawa, 2015. "Deep Integration in Eastern and Southern Africa: What are the Stakes?," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 24(5), pages 677-706.
    14. Isabelle Rabaud, 2014. "Gains à l'échange de services pour les pays africains : mythe ou réalité ?," Working Papers halshs-01250890, HAL.
    15. Zoryana Olekseyuk, 2015. "The EU-Ukraine Deep and Comprehensive Free Trade Agreement and the importance of FDI," EcoMod2015 8391, EcoMod.
    16. Zoryana Olekseyuk, 2016. "Modeling of FDI in business services: Additional effects in case of Ukraine's European integration," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(7), pages 1010-1043, October.
    17. Christen, Elisabeth & Francois, Joseph & Hoekman, Bernard, 2013. "Computable General Equilibrium Modeling of Market Access in Services," Handbook of Computable General Equilibrium Modeling, Elsevier.
    18. Balistreri,Edward Jay & Maliszewska,Maryla & Osorio-Rodarte,Israel & Tarr,David & Yonezawa,Hidemichi, 2016. "Poverty and shared prosperity implications of deep integration in Eastern and Southern Africa," Policy Research Working Paper Series 7660, The World Bank.
    19. World Bank, 2010. "Reform and Regional Integration of Professional Services in East Africa : Time for Action," World Bank Other Operational Studies 2957, The World Bank.
    20. Isabelle RABAUD, 2014. "Gains à l'échange de services pour les pays africains : Mythe ou réalité ?," LEO Working Papers / DR LEO 1808, Orleans Economics Laboratory / Laboratoire d'Economie d'Orleans (LEO), University of Orleans.
    21. Edward J. Balistreri & Zoryana Olekseyuk & David G. Tarr, 2017. "Privatisation and the unusual case of Belarusian accession to the WTO," The World Economy, Wiley Blackwell, vol. 40(12), pages 2564-2591, December.

    More about this item


    Services Liberalization; General Equilibrium; Endogenous Productivity; Tanzania; Foreign Direct Investment; Imperfect Competition.;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade


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