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Landlocked or policy locked ? how services trade protection deepens economic isolation

  • Borchert, Ingo
  • Gootiiz, Batshur
  • Grover, Arti
  • Mattoo, Aaditya

A new cross-country database on services policy reveals a perverse pattern: many landlocked countries restrict trade in the very services that connect them with the rest of the world. On average, telecommunications and air-transport policies are significantly more restrictive in landlocked countries than elsewhere. The phenomenon is most starkly visible in Sub-Saharan Africa and is associated with lower levels of political accountability. This paper finds evidence that these policies lead to more concentrated market structures and more limited access to services than these countries would otherwise have, even after taking into account the influence of geography and incomes, and the possibility that policy is endogenous. Even moderate liberalization in these sectors could lead to an increase of cellular subscriptions by 7 percentage points and a 20-percent increase in the number of flights. Policies in other countries, industrial and developing alike, also limit competition in international transport services. Hence,"trade-facilitating"investments under various"aid-for-trade"initiatives are likely to earn a low return unless they are accompanied by meaningful reform in these services sectors.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5942.

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Date of creation: 01 Jan 2012
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Handle: RePEc:wbk:wbrwps:5942
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  1. Devashish Mitra & Dimitrios D. Thomakos & Mehmet A. Ulubaşoglu, 2002. ""Protection For Sale" In A Developing Country: Democracy Vs. Dictatorship," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 497-508, August.
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  16. Kotaro Suzumura & Kazuharu Kiyono, 1987. "Entry Barriers and Economic Welfare," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 157-167.
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  18. Gasmi, Farid & Noumba Um, Paul & Virto, Laura Recuero, 2006. "Political accountability and regulatory performance in infrastructure industries : an empirical analysis," Policy Research Working Paper Series 4101, The World Bank.
  19. Geloso Grosso, Massimo & Shepherd, Ben, 2009. "Liberalizing air cargo services in APEC," MPRA Paper 17781, University Library of Munich, Germany.
  20. Raballand, Gael & Kunaka, Charles & Giersing, Bo, 2008. "The impact of regional liberalization and harmonization in road transport services : a focus on Zambia and lessons for landlocked countries," Policy Research Working Paper Series 4482, The World Bank.
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