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Services trade and domestic regulation

Author

Listed:
  • Kox, Henk L.M.
  • Nordås, Hildegunn Kyvik
Abstract
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.

Suggested Citation

  • Kox, Henk L.M. & Nordås, Hildegunn Kyvik, 2007. "Services trade and domestic regulation," MPRA Paper 2116, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:2116
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Trade in services; regulation; GATS; fixed trade costs;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L8 - Industrial Organization - - Industry Studies: Services
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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