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Services trade and domestic regulation

  • Kox, Henk L.M.
  • Nordås, Hildegunn Kyvik

This paper argues that regulatory measures affect the fixed cost of entering a market as well as the variable costs of servicing that market. Moreover, differences in regulation among countries often imply that firms have to incur entry costs in every new market. Indicators of regulatory intensity and heterogeneity are introduced in a gravity model and their impact on market entry and subsequent trade flows estimated for total services, business services and financial services. It is found that regulatory heterogeneity has a relatively large negative impact on both market entry and subsequent trade flows. Further, regulatory barriers have a negative effect on the local services sectors’ export performance. Finally it is found that regulations that aims at correcting market failure can have a positive impact on trade. It is concluded that services trade liberalization and regulatory reforms are complementary in creating competitive services markets.

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File URL: http://mpra.ub.uni-muenchen.de/2116/1/MPRA_paper_2116.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2116.

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Date of creation: 14 Feb 2007
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Handle: RePEc:pra:mprapa:2116
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  1. repec:cup:cbooks:9780521855761 is not listed on IDEAS
  2. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  3. Andrew B. Bernard & J. Bradford Jensen & Peter K. Schott, 2003. "Falling trade costs, heterogeneous firms and industry dynamics," LSE Research Online Documents on Economics 20027, London School of Economics and Political Science, LSE Library.
  4. James E. Anderson & Eric van Wincoop, 2001. "Gravity with Gravitas: A Solution to the Border Puzzle," NBER Working Papers 8079, National Bureau of Economic Research, Inc.
  5. J. M. C. Santos Silva & Silvana Tenreyro, 2006. "The Log of Gravity," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 641-658, November.
  6. Andrew B. Bernard & J. Bradford Jensen, 1997. "Exceptional Exporter Performance: Cause, Effect, or Both?," NBER Working Papers 6272, National Bureau of Economic Research, Inc.
  7. Rudolf Adlung, 2006. "Services Negotiations in the Doha Round: Lost in Flexibility?," Journal of International Economic Law, Oxford University Press, vol. 9(4), pages 865-893, December.
  8. repec:rus:hseeco:122439 is not listed on IDEAS
  9. Aaditya Mattoo & Pierre Sauve, 2003. "Domestic Regulation and Service Trade Liberalization," World Bank Publications, The World Bank, number 15081.
  10. 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.
  11. Anthony Venables, 1994. "Integration and the export behaviour of firms: Trade costs, trade volumes and welfare," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(1), pages 118-132, March.
  12. Philippa Dee & Kevin Hanslow, 2002. "Multilateral liberalisation of services trade," International Trade 0207002, EconWPA.
  13. Henk Kox & Arjan Lejour & Raymond Montizaan, 2004. "The free movement of services within the EU," CPB Document 69, CPB Netherlands Bureau for Economic Policy Analysis.
  14. Henk Kox & Arjan Lejour, 2005. "Regulatory heterogeneity as obstacle for international services trade," CPB Discussion Paper 49, CPB Netherlands Bureau for Economic Policy Analysis.
  15. Fukunari Kimura & Hyun-Hoon Lee, 2006. "The Gravity Equation in International Trade in Services," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(1), pages 92-121, April.
  16. Stephen S. Golub & Dana Hajkova & Daniel Mirza & Giuseppe Nicoletti & Kwang-Yeol Yoo, 2003. "The Influence of Policies on Trade and Foreign Direct Investment," OECD Economic Studies, OECD Publishing, vol. 2003(1), pages 7-83.
  17. Elhanan Helpman & Marc Melitz & Yona Rubinstein, 2006. "Trading Partners and Trading Volumes," DEGIT Conference Papers c011_022, DEGIT, Dynamics, Economic Growth, and International Trade.
  18. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD Publishing.
  19. Sébastien Jean & Giuseppe Nicoletti, 2002. "Product Market Regulation and Wage Premia in Europe and North America: An Empirical Investigation," OECD Economics Department Working Papers 318, OECD Publishing.
  20. Stephen S. Golub, 2003. "Measures Of Restrictions on Inward Foreign Direct Investment for OECD Countries," OECD Economics Department Working Papers 357, OECD Publishing.
  21. Stephen S. Golub, 2003. "Measures of Restrictions on Inward Foreign Direct Investment for OECD Countries," OECD Economic Studies, OECD Publishing, vol. 2003(1), pages 85-116.
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