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Modeling Trade in Services: Multiple Modes, Barriers to Trade, and Data Limitations

Author

Listed:
  • Barbe, Andre
  • Chambers, Art
  • Khachaturian, Tamar
  • Riker, David
Abstract
In 2015, international trade in services reached 13 percent of world GDP, according to the World Bank. Nonetheless, this trade is impeded by policy barriers that restrict foreign entry, the movement of people, competition, or regulatory transparency. It is challenging to quantify the impact of these barriers to international trade in services. There is very limited information on the value of these trade flows or the size of the barriers that impede them. In addition, the international provision of services occurs through multiple and inter-connected modes of delivery which can be complementary or competing. Finally, barriers to trade in services are complex and difficult to measure and compare across countries. Our research captures some of these complexities of international trade in services and overcomes some of the data challenges. We develop a model of trade in services that includes firm heterogeneity and multiple modes of delivery, including cross-border trade and foreign affiliate transactions. We then use the model to estimate how trade flows and prices would change if the European Union reduced barriers to non-EU providers of services by 50 percent. We find that this liberalization would increase the value of cross-border imports into the EU countries and foreign affiliate purchases in the EU countries by about 25 percent. However, it would only decrease the sales of domestic producers by 0.4 to 6.1 percent, and reduce overall prices of the services in the EU countries by 0.1 to 1.2 percent.

Suggested Citation

  • Barbe, Andre & Chambers, Art & Khachaturian, Tamar & Riker, David, 2017. "Modeling Trade in Services: Multiple Modes, Barriers to Trade, and Data Limitations," Conference papers 332919, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332919
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    File URL: https://ageconsearch.umn.edu/record/332919/files/8705.pdf
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    References listed on IDEAS

    as
    1. Hildegunn Kyvik Nordås & Iza Lejárraga & Sébastien Miroudot & Frédéric Gonzales & Massimo Geloso Grosso & Dorothée Rouzet & Asako Ueno, 2014. "Services Trade Restrictiveness Index (STRI): Audio-visual Services," OECD Trade Policy Papers 174, OECD Publishing.
    2. di Giovanni, Julian & Levchenko, Andrei A. & Rancière, Romain, 2011. "Power laws in firm size and openness to trade: Measurement and implications," Journal of International Economics, Elsevier, vol. 85(1), pages 42-52, September.
    3. Massimo Geloso Grosso & Hildegunn Kyvik Nordås & Frédéric Gonzales & Iza Lejárraga & Sébastien Miroudot & Asako Ueno & Dorothée Rouzet, 2014. "Services Trade Restrictiveness Index (STRI): Legal and Accounting Services," OECD Trade Policy Papers 171, OECD Publishing.
    4. Zhai, Fan, 2008. "Armington Meets Melitz: Introducing Firm Heterogeneity in a Global CGE Model of Trade," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 23, pages 575-604.
    5. Massimo Geloso Grosso & Hildegunn Kyvik Nordås & Asako Ueno & Frédéric Gonzales & Iza Lejárraga & Sébastien Miroudot & Dorothée Rouzet, 2014. "Services Trade Restrictiveness Index (STRI): Transport and Courier Services," OECD Trade Policy Papers 176, OECD Publishing.
    6. Massimo Geloso Grosso & Iza Lejárraga & Hildegunn Kyvik Nordås & Frédéric Gonzales & Sébastien Miroudot & Asako Ueno & Dorothée Rouzet, 2014. "Services Trade Restrictiveness Index (STRI): Construction, Architecture and Engineering Services," OECD Trade Policy Papers 170, OECD Publishing.
    7. Hildegunn Kyvik Nordås & Massimo Geloso Grosso & Frédéric Gonzales & Iza Lejárraga & Sébastien Miroudot & Asako Ueno & Dorothée Rouzet, 2014. "Services Trade Restrictiveness Index (STRI): Computer and Related Services," OECD Trade Policy Papers 169, OECD Publishing.
    8. Hildegunn Kyvik Nordås & Massimo Geloso Grosso & Frédéric Gonzales & Iza Lejárraga & Molly Lesher & Sébastien Miroudot & Asako Ueno & Dorothée Rouzet, 2014. "Services Trade Restrictiveness Index (STRI): Telecommunication Services," OECD Trade Policy Papers 172, OECD Publishing.
    9. Asako Ueno & Massimo Geloso Grosso & Iza Lejárraga & Hildegunn Kyvik Nordås & Sébastien Miroudot & Frédéric Gonzales & Dorothée Rouzet, 2014. "Services Trade Restrictiveness Index (STRI): Distribution Services," OECD Trade Policy Papers 173, OECD Publishing.
    10. Dorothée Rouzet & Hildegunn Kyvik Nordås & Frédéric Gonzales & Massimo Geloso Grosso & Iza Lejárraga & Sébastien Miroudot & Asako Ueno, 2014. "Services Trade Restrictiveness Index (STRI): Financial Services," OECD Trade Policy Papers 175, OECD Publishing.
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