Which import restrictions matter for trade in services ?

This study exploits rich databases of services trade and import restrictions to estimate the effects of discrete restrictiveness levels on bilateral services flows using a gravity model, and to derive tariff equivalents in three service sectors (Other Business Services, Banking and Insurance). We preserve the discrete nature of the restrictions to import, which are provided by the World Bank - WB (see Borchert et al., 2014). For each sector-country combination, we evaluate restrictiveness using four discrete levels of restrictiveness, from totally open to closed. This approach allows us track the effect of the specific import restrictions in place. We highlight their non-linear impact on services flows showing threshold effects and the trade stimulating effect of minor import restrictions on a restriction-free environment. Finally we derive tariff equivalents directly from the impact of applied restrictions.