IDEAS home Printed from
   My bibliography  Save this paper

Liberalizing Trade in Services in Tunisia: General Equilibrium Effects


  • Saoussen Ben Romdhane

    () (Teaching Assistant in Economics, Institut Supérieur d’Informatique et de Gestion de Kairouan.)


The main objective of the paper is to simulate removal of barriers to trade in services in Tunisia by focusing on two modes; cross-border delivery (Mode 1) and commercial presence (Mode 3). For the first mode, we model restrictions as tariff equivalent-price wedges. Thus, the simulation of services liberalization consists of removing totally, or partially, these estimated tariff equivalents. We assume for the second mode (Mode 3), that restrictions are a combination of monopoly-rent distortions and inefficiency costs. Our approach consists of introducing excess cost directly into the production function through the total factor productivity coefficient. Meanwhile, the rent component is handled in the same way as domestic taxes on sales of domestically-produced services. Under this mode, we consider three scenarios varying according to alternative assumptions on the relative importance of excess cost as opposed to rents. The first one assumes that prior to liberalization; firms did not have any market power but were inefficient by comparison to best- practice. The second scenario makes the opposite assumption – that local production followed best-practice but that market power generated rents in the initial situation. The final scenario is a mixed one assuming that inefficiency cost and rents weigh equally. Results show that the potential welfare implications of services liberalization are clearly positive and substantial. The liberalization of cross border trade leads to a small gain in welfare while the combination of rent generating and cost inefficiencies distortions has a more significant effect. Welfare increases by more than 4 percent when we consider the two modes of service delivery and most of this gain is attributed to FDI liberalization. The service share in production is relatively important, in particular when we combine the effects of Mode 1 and the mixed scenario of Mode 3. This result confirms the idea that liberalizing services has a large impact on welfare.

Suggested Citation

  • Saoussen Ben Romdhane, 2008. "Liberalizing Trade in Services in Tunisia: General Equilibrium Effects," Working Papers 404, Economic Research Forum, revised 06 Jan 2008.
  • Handle: RePEc:erg:wpaper:404

    Download full text from publisher

    File URL:
    Download Restriction: no

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Olivier Boylaud & Giuseppe Nicoletti, 2003. "Regulation, market structure and performance in telecommunications," OECD Economic Studies, OECD Publishing, vol. 2001(1), pages 99-142.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:erg:wpaper:404. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sherine Ghoneim). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.