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Services Trade Policy, Domestic Regulation and Economic Governance

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  • Matteo Fiorini
  • Bernard Hoekman

Abstract

This paper empirically investigates the role of governance institutions in shaping the economic impact of services trade reform. The analysis focuses on the effects of services trade policy on the productivity of manufacturing sectors that use services as intermediate inputs. We find that these effects depend on the quality of governance institutions in the country implementing trade and investment reform. The moderating effects of horizontal (cross-cutting) and services sector-specific dimensions of economic governance institutions are found to differ. For some services activities market access opening can substitute for weak regulation/governance; in others bad regulatory governance is a binding constraint and needs to be addressed directly for market opening to have the greatest benefits. Our empirical findings suggest these complementarity and substitution relationships may be associated with the types of market failure that arise in different services sectors and the effectiveness of regulatory regimes in addressing them. We also find that positive effects of services trade and investment reforms are higher in EU member states.

Suggested Citation

  • Matteo Fiorini & Bernard Hoekman, 2017. "Services Trade Policy, Domestic Regulation and Economic Governance," European Economy - Discussion Papers 058, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    • Handle: RePEc:euf:dispap:058
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    More about this item

    JEL classification:

    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • L8 - Industrial Organization - - Industry Studies: Services
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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