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What determines whether preferential liberalization of barriers against foreign investors in services are beneficial or immizerising: Application to the case of Kenya

Author

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  • Balistreri, Edward J.
  • Jensen, Jesper
  • Tarr, David
Abstract
Despite the fact that many modern preferential trade agreements include commitments to foreign investors in imperfectly competitive services sectors, the literature has not established conditions under which these agreements are beneficial or harmful. The authors fill that void by developing a model with monopolistic competition and foreign direct investment in services with Dixit-Stiglitz endogenous productivity effects from additional varieties. They specify a numerical model, with probability distributions of all parameters. The model is executed 30,000 times, and results are reported as probability of an outcome, based on the sample distribution. In order to ground the results in reality, the authors apply the model to Kenya. They show that preferential commitments in services could be immizerising. Losses are more likely the greater the share of initial rent capture on the services barriers in our home country and the more technologically advanced are the excluded regions relative to the partner region.

Suggested Citation

  • Balistreri, Edward J. & Jensen, Jesper & Tarr, David, 2015. "What determines whether preferential liberalization of barriers against foreign investors in services are beneficial or immizerising: Application to the case of Kenya," Economics Discussion Papers 2015-47, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwedp:201547
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    References listed on IDEAS

    as
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    Citations

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    Cited by:

    1. Veronika Movchan & Thomas F. Rutherford & David G. Tarr & Hidemichi Yonezawa, 2023. "The importance of deep integration in preferential trade agreements: the case of a successfully implemented Ukraine–Turkey free trade agreement," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 159(1), pages 1-50, February.
    2. repec:zbw:bofitp:2017_002 is not listed on IDEAS
    3. Edward J. Balistreri & Zoryana Olekseyuk, 2021. "Economic Impacts of Investment Facilitation," Center for Agricultural and Rural Development (CARD) Publications 21-wp615, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    4. Edward J. Balistreri & Zoryana Olekseyuk & David G. Tarr, 2017. "Privatisation and the unusual case of Belarusian accession to the WTO," The World Economy, Wiley Blackwell, vol. 40(12), pages 2564-2591, December.
    5. Edward J Balistreri & Maryla Maliszewska & Israel Osorio-Rodarte & David G Tarr & Hidemichi Yonezawa, 2018. "Poverty, Welfare and Income Distribution Implications of Reducing Trade Costs Through Deep Integration in Eastern and Southern Africa," Journal of African Economies, Centre for the Study of African Economies, vol. 27(2), pages 172-200.
    6. Balistreri, Edward J. & Maliszewska, Maryla & Osorio-Rodarte, Israel & Tarr, David G. & Yonezawa, Hidemichi, 2016. "Poverty and Shared Prosperity Implications of Deep Integration in Eastern and Southern Africa," Conference papers 332681, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Edward J. Balistreri & Zoryana Olekseyuk & David G. Tarr, 2017. "Privatisation and the unusual case of Belarusian accession to the WTO," The World Economy, Wiley Blackwell, vol. 40(12), pages 2564-2591, December.
    8. Balistreri, Edward J. & Tarr, David G., 2020. "Comparison of deep integration in the Melitz, Krugman and Armington models: The case of The Philippines in RCEP," Economic Modelling, Elsevier, vol. 85(C), pages 255-271.
    9. Bernard Hoekman & Dominique Njinkeu, 2017. "Integrating Africa: Some Trade Policy Research Priorities and Challenges," RSCAS Working Papers 2017/43, European University Institute.

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    More about this item

    Keywords

    immizerising services liberalization; preferential liberalization; multinationals; monopolistic competition; foreign direct investment; endogenous productivity effects;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

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