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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. Joseph Francois & Miriam Manchin, 2007. "Institutions, Infrastructure and Trade," Development Working Papers 224, Centro Studi Luca d\'Agliano, University of Milano.
  2. Carsten Fink & Aaditya Mattoo & Ileana Cristina Neagu, 2002. "Trade in International Maritime Services: How Much Does Policy Matter?," World Bank Economic Review, World Bank Group, vol. 16(1), pages 81-108, June.
  3. Jingang Zhao, 2009. "Necessary and sufficient conditions for the optimal number of firms," Journal of Economics, Springer, vol. 98(3), pages 235-246, December.
  4. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
  5. 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.
  6. Mohamed Ali Marouani & Laura Munro, 2009. "Assessing Barriers to Trade in Services in the MENA Region," OECD Trade Policy Papers 84, OECD Publishing.
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  8. Olivier Boylaud & Giuseppe Nicoletti, 2001. "Regulation, market structure and performance in telecommunications," OECD Economic Studies, OECD Publishing, vol. 2001(1), pages 99-142.
  9. 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.
  10. Gasmi, Farid & Recuero Virto, Laura, 2008. "The Determinants and Impact of Telecommunications Reform in Developping Countries," IDEI Working Papers 530, Institut d'Économie Industrielle (IDEI), Toulouse.
  11. Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009. "Estimating Trade Restrictiveness Indices," Economic Journal, Royal Economic Society, vol. 119(534), pages 172-199, 01.
  12. Gual, Jordi & Trillas, Francesc, 2006. "Telecommunications policies: Measurement and determinants," IESE Research Papers D/630, IESE Business School.
  13. 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.
  14. Jean-Jacques Hallaert & Ricardo Cavazos Cepeda & Gimin Kang, 2011. "Estimating the Constraints to Trade of Developing Countries," OECD Trade Policy Papers 116, OECD Publishing.
  15. Nora Dihel & Ben Shepherd, 2007. "Modal Estimates of Services Barriers," OECD Trade Policy Papers 51, OECD Publishing.
  16. Fink, Carsten & Mattoo, Aaditya & Rathindran, Randeep, 2002. "An assessment of telecommunications reform in developing countries," Policy Research Working Paper Series 2909, The World Bank.
  17. Kishore Gawande & Pravin Krishna & Marcelo Olarreaga, 2009. "What Governments Maximize and Why: The View from Trade," NBER Working Papers 14953, National Bureau of Economic Research, Inc.
  18. Calì, Massimiliano & te Velde, Dirk Willem, 2011. "Does Aid for Trade Really Improve Trade Performance?," World Development, Elsevier, vol. 39(5), pages 725-740, May.
  19. Geloso Grosso, Massimo & Shepherd, Ben, 2009. "Liberalizing air cargo services in APEC," MPRA Paper 17781, University Library of Munich, Germany.
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