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What determines whether preferential liberalization of barriers against foreign investors in services are beneficial or immizerising: Application to the case of Kenya

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  • Balistreri, Edward J.
  • Jensen, Jesper
  • Tarr, David

Abstract

Despite the fact that many modern preferential trade agreements include commitments to foreign investors in imperfectly competitive services sectors, the literature has not established conditions under which these agreements are beneficial or harmful. The authors fill that void by developing a model with monopolistic competition and foreign direct investment in services with Dixit-Stiglitz endogenous productivity effects from additional varieties. They specify a numerical model, with probability distributions of all parameters. The model is executed 30,000 times, and results are reported as probability of an outcome, based on the sample distribution. In order to ground the results in reality, the authors apply the model to Kenya. They show that preferential commitments in services could be immizerising. Losses are more likely the greater the share of initial rent capture on the services barriers in the home country and the more technologically advanced are the excluded regions relative to the partner region.

Suggested Citation

  • Balistreri, Edward J. & Jensen, Jesper & Tarr, David, 2015. "What determines whether preferential liberalization of barriers against foreign investors in services are beneficial or immizerising: Application to the case of Kenya," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 9, pages 1-134.
  • Handle: RePEc:zbw:ifweej:201542
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    File URL: http://dx.doi.org/10.5018/economics-ejournal.ja.2015-42
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    References listed on IDEAS

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    1. Philippa Dee, 2007. "East Asian Economic Integration and its Impact on Future Growth," The World Economy, Wiley Blackwell, vol. 30(3), pages 405-423, March.
    2. Arnold, Jens M. & Javorcik, Beata S. & Mattoo, Aaditya, 2011. "Does services liberalization benefit manufacturing firms?: Evidence from the Czech Republic," Journal of International Economics, Elsevier, vol. 85(1), pages 136-146, September.
    3. 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.
    4. L. ALAN WINTERS & NEIL McCULLOCH & ANDREW McKAY, 2015. "Trade Liberalization and Poverty: The Evidence So Far," World Scientific Book Chapters,in: Non-Tariff Barriers, Regionalism and Poverty Essays in Applied International Trade Analysis, chapter 14, pages 271-314 World Scientific Publishing Co. Pte. Ltd..
    5. Keller, Wolfgang, 2002. "Trade and the Transmission of Technology," Journal of Economic Growth, Springer, vol. 7(1), pages 5-24, March.
    6. Yanling Wang, 2010. "FDI and productivity growth: the role of inter-industry linkages," Canadian Journal of Economics, Canadian Economics Association, vol. 43(4), pages 1243-1272, November.
    7. Balistreri, Edward J. & Rutherford, Thomas F. & Tarr, David G., 2009. "Modeling services liberalization: The case of Kenya," Economic Modelling, Elsevier, vol. 26(3), pages 668-679, May.
    8. Glenn W. Harrison & Thomas F. Rutherford & David G. Tarr, 2014. "Trade Policy Options for Chile: The Importance of Market Access," World Scientific Book Chapters,in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 14, pages 329-359 World Scientific Publishing Co. Pte. Ltd..
    9. Balistreri , Edward J. & Tarr, David G., 2011. "Services liberalization in preferential trade arrangements : the case of Kenya," Policy Research Working Paper Series 5552, The World Bank.
    10. Fernandes, Ana M. & Paunov, Caroline, 2012. "Foreign direct investment in services and manufacturing productivity: Evidence for Chile," Journal of Development Economics, Elsevier, vol. 97(2), pages 305-321.
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    Cited by:

    1. repec:bla:worlde:v:40:y:2017:i:12:p:2564-2591 is not listed on IDEAS
    2. 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.
    3. 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

    Keywords

    immizerising services liberalization; preferential liberalization; multinationals; monopolistic competition; foreign direct investment; endogenous productivity effects;

    JEL classification:

    • 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
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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