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Services trade within Canada and the European Union; what do they have in common?

Author

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  • Arjan Lejour

    () (CPB Netherlands Bureau for Economic Policy Analysis)

  • J.W. de Paiva Verheijden

Abstract

This paper explains bilateral services trade using a gravity equation and compares the results with trade in goods. We analyse bilateral trade between the provinces of Canada and between the member states of the European Union. We conclude that the gravity equation explains the variability in services trade very well: market size of the exporting and importing regions and distance are the most important explanatory variables. On average, distance is a less hindrance for services trade than for goods trade. Differences in languages and the regulation of product markets hamper services and goods trade in Europe significantly. Trade in services is also hampered by regulation in the importing country, but this is not true for goods. Services trade within Canada is twice as high as within Europe measured as share of GDP. Tentative estimates suggest that intra-EU services trade could be much higher if the internal market would function like the Canadian services market.

Suggested Citation

  • Arjan Lejour & J.W. de Paiva Verheijden, 2004. "Services trade within Canada and the European Union; what do they have in common?," CPB Discussion Paper 42, CPB Netherlands Bureau for Economic Policy Analysis.
  • Handle: RePEc:cpb:discus:42
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. van der Marel, Erik, 2011. "Determinants of comparative advantage in services," LSE Research Online Documents on Economics 38993, London School of Economics and Political Science, LSE Library.
    2. Henk Kox & Arjan Lejour, 2005. "Regulatory heterogeneity as obstacle for international services trade," CPB Discussion Paper 49, CPB Netherlands Bureau for Economic Policy Analysis.
    3. J. Hanna & L. Lévi & S. Petit, 2015. "Intra-tourism trade, income distribution and tourism endowment: an econometric investigation," Applied Economics, Taylor & Francis Journals, vol. 47(21), pages 2184-2200, May.
    4. Nora Dihel & Felix Eschenbach & Ben Shepherd, 2006. "South-South Services Trade," OECD Trade Policy Papers 39, OECD Publishing.
    5. Anderson,James E. & Borchert,Ingo & Mattoo,Aaditya & Yotov,Yoto Valentinov, 2015. "Dark costs, missing data : shedding some light on services trade," Policy Research Working Paper Series 7465, The World Bank.
    6. Keith Walsh, 2006. "Trade in Services: Does Gravity Hold? A Gravity Model Approach to Estimating Barriers to Services Trade," The Institute for International Integration Studies Discussion Paper Series iiisdp183, IIIS.
    7. Nowak, Jean-Jacques & Petit, Sylvain & Sahli, Mondher, 2013. "Intra-Tourism Trade in Europe," MPRA Paper 62236, University Library of Munich, Germany.
    8. Erik Marel & Ben Shepherd, 2013. "Services Trade, Regulation and Regional Integration: Evidence from Sectoral Data," The World Economy, Wiley Blackwell, vol. 36(11), pages 1393-1405, November.
    9. Dao, Ngoc Tien & Pham, Van Nho & Doan, Quang Hung, 2014. "Analyzing the Determinants of Services Trade Flow between Vietnam and European Union: Gravity Model Approach," MPRA Paper 63982, University Library of Munich, Germany.
    10. Nadine Behncke, 2013. "Assessing the impact of European Integration on sectoral trade in services," FIW Working Paper series 109, FIW.
    11. Shingal, ANIRUDH, 2009. "How much do agreements matter for services trade?," MPRA Paper 32815, University Library of Munich, Germany, revised 15 May 2010.
    12. Henk Kox & Arjan Lejour, 2006. "The Effects of the Services Directive on Intra-eu Trade and fdi," Revue économique, Presses de Sciences-Po, vol. 57(4), pages 747-769.

    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L8 - Industrial Organization - - Industry Studies: Services
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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