Quantifying the Impact of Services Liberalization in a Developing Country

The authors consider how service liberalization differs from goods liberalization in terms of welfare, the level and composition of output, and factor prices within a developing economy, in this case Tunisia. Despite recent movements toward liberal...

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Main Authors: Konan, Denise Eby, Maskus, Keith E.
Format: Policy Research Working Paper
Language:English
en_US
Published: World Bank, Washington, DC 2014
Subjects:
CD
GDP
Online Access:http://documents.worldbank.org/curated/en/2003/01/2880185/quantifying-impact-services-liberalization-developing-country
http://hdl.handle.net/10986/17425
id okr-10986-17425
recordtype oai_dc
repository_type Digital Repository
institution_category Foreign Institution
institution Digital Repositories
building World Bank Open Knowledge Repository
collection World Bank
language English
en_US
topic SERVICES
GOODS
TRADE LIBERALIZATION
WELFARE ECONOMICS
OUTPUTS
FACTOR PRICES
DEVELOPING COUNTRIES
TARIFFS
FOREIGN DIRECT INVESTMENTS
MONOPOLISTIC COMPETITION
COMPETITIVENESS
DOMESTIC TRADE
AGGREGATE VARIABILITY
DEREGULATION
ECONOMIC DEVELOPMENT
ACCOUNTING
ACCOUNTING PRACTICES
ACTUAL COSTS
AGGREGATE IMPORT EXPENDITURES
AGGREGATE TRADE
AGGREGATE TRADE FLOWS
AGREEMENT ON TRADE
AGRICULTURE
BALANCE OF PAYMENTS
BANKING SYSTEM
BENCHMARK
BENCHMARK DATA
BENCHMARK EQUILIBRIUM
BENCHMARK TRADE ELASTICITIES
BENCHMARKS
BORDER TRADE
CAPITAL ACCOUNT
CAPITAL GAINS
CAPITAL INCREASE
CAPITAL INPUTS
CAPITAL STOCK
CAPITAL SUBSTITUTION
CARTEL
CARTELS
CD
CHANGES IN TRADE
COMPARATIVE ADVANTAGE
COMPETITIVE MARKET
COMPETITIVE MARKETS
COMPETITIVENESS
CONSTANT ELASTICITY OF SUBSTITUTION
CONSTANT ELASTICITY OF TRANSFORMATION
CONSTANT RETURNS TO SCALE
CONSUMER PRICE INDEX
CONSUMER PRICES
CONSUMERS
COUNTRY OF ORIGIN
CURRENT ACCOUNT
CURRENT ACCOUNT BALANCE
CURRENT ENVIRONMENT
CUSTOMS PROCEDURES
DEREGULATION
DOMESTIC PRODUCERS
DOMESTIC SUPPLIERS
ECONOMIC ACTIVITY
ECONOMIC DEVELOPMENT
ECONOMIC EFFICIENCY
ECONOMIC GROWTH
ECONOMIC RENTS
ECONOMICS
ECONOMIES OF SCALE
ECONOMISTS
ELASTICITIES
ELASTICITY OF SUBSTITUTION
EMPIRICAL EVIDENCE
EMPIRICAL INFORMATION
EMPIRICAL STUDIES
EQUILIBRIUM
EQUIVALENT VARIATION
EXCHANGE RATE
EXPORT INDUSTRIES
EXPORT SECTORS
EXPORT TRADE
EXPORT VOLUMES
EXPORTS
FACTOR DEMAND
FINAL GOODS
FINANCIAL SECTOR
FINANCIAL SERVICES
FOREIGN DIRECT INVESTMENT
FOREIGN ENTRY
FOREIGN FIRMS
FOREIGN INVESTMENT
FOREIGN MARKETS
FOREIGN OWNERSHIP
FOREIGN SALES
FOREIGN SUPPLIERS
FREE GOODS
FRICTIONAL UNEMPLOYMENT
FULL LIBERALIZATION
GDP
GENERAL EQUILIBRIUM MODEL
GLOBAL INTEGRATION
GOVERNMENT EXPENDITURES
GRAVITY MODEL
IMPERFECT COMPETITION
IMPORT CONSUMPTION
IMPORT PRICES
IMPORTS
INCOME
INCOME ELASTICITIES
INEFFICIENCY
INSURANCE
INTEREST RATE
INTERMEDIATE IMPORTS
INTERMEDIATE INPUTS
INTERNATIONAL PRICES
INTERNATIONAL STANDARDS
INTERNATIONAL TRADE
INVESTMENT FLOWS
INVESTMENT LIBERALIZATION
LABOR FORCE
LAWS
LIBERALIZATION OF TRADE
LIBERALIZATION OF TRADE IN GOODS
LOST TARIFF REVENUES
MARGINAL COST
MARGINAL COST CONDITION
MARGINAL COSTS
MARKET POWER
MARKET STRUCTURE
POLICY RESEARCH
PREFERENTIAL TREATMENT
PRICE ELASTICITY
PRICE ELASTICITY OF DEMAND
PRICE INCREASES
PRIMARY FACTORS
PRIVATIZATION
PRODUCERS
PRODUCT DIFFERENTIATION
PRODUCTION FUNCTION
PRODUCTION FUNCTIONS
PRODUCTIVITY
PUBLIC SERVICES
REAL EXCHANGE RATE
REAL INCOME
REAL PRICES
REGIONAL TRADE
RETURN ON CAPITAL
SAVINGS
SERVICE DELIVERY
SPECIALIZATION
SUBSIDIARIES
TARIFF CLASSIFICATION
TARIFF DATA
TARIFF RATES
TAX RATES
TAX REVENUES
TELECOMMUNICATIONS
TOTAL OUTPUT
TRADE AGREEMENT
TRADE BALANCE
TRADE COSTS
TRADE LIBERALIZATION
TRADE PATTERNS
TRADE REFORM
TRADE REFORMS
TRANSPORT
UNEMPLOYMENT
UNILATERAL TRADE
UNILATERAL TRADE LIBERALIZATION
UTILITY FUNCTION
VALUE ADDED
WAGES
WELFARE GAINS
WELFARE IMPACTS
WORLD TRADE
WORLD TRADE ORGANIZATION
spellingShingle SERVICES
GOODS
TRADE LIBERALIZATION
WELFARE ECONOMICS
OUTPUTS
FACTOR PRICES
DEVELOPING COUNTRIES
TARIFFS
FOREIGN DIRECT INVESTMENTS
MONOPOLISTIC COMPETITION
COMPETITIVENESS
DOMESTIC TRADE
AGGREGATE VARIABILITY
DEREGULATION
ECONOMIC DEVELOPMENT
ACCOUNTING
ACCOUNTING PRACTICES
ACTUAL COSTS
AGGREGATE IMPORT EXPENDITURES
AGGREGATE TRADE
AGGREGATE TRADE FLOWS
AGREEMENT ON TRADE
AGRICULTURE
BALANCE OF PAYMENTS
BANKING SYSTEM
BENCHMARK
BENCHMARK DATA
BENCHMARK EQUILIBRIUM
BENCHMARK TRADE ELASTICITIES
BENCHMARKS
BORDER TRADE
CAPITAL ACCOUNT
CAPITAL GAINS
CAPITAL INCREASE
CAPITAL INPUTS
CAPITAL STOCK
CAPITAL SUBSTITUTION
CARTEL
CARTELS
CD
CHANGES IN TRADE
COMPARATIVE ADVANTAGE
COMPETITIVE MARKET
COMPETITIVE MARKETS
COMPETITIVENESS
CONSTANT ELASTICITY OF SUBSTITUTION
CONSTANT ELASTICITY OF TRANSFORMATION
CONSTANT RETURNS TO SCALE
CONSUMER PRICE INDEX
CONSUMER PRICES
CONSUMERS
COUNTRY OF ORIGIN
CURRENT ACCOUNT
CURRENT ACCOUNT BALANCE
CURRENT ENVIRONMENT
CUSTOMS PROCEDURES
DEREGULATION
DOMESTIC PRODUCERS
DOMESTIC SUPPLIERS
ECONOMIC ACTIVITY
ECONOMIC DEVELOPMENT
ECONOMIC EFFICIENCY
ECONOMIC GROWTH
ECONOMIC RENTS
ECONOMICS
ECONOMIES OF SCALE
ECONOMISTS
ELASTICITIES
ELASTICITY OF SUBSTITUTION
EMPIRICAL EVIDENCE
EMPIRICAL INFORMATION
EMPIRICAL STUDIES
EQUILIBRIUM
EQUIVALENT VARIATION
EXCHANGE RATE
EXPORT INDUSTRIES
EXPORT SECTORS
EXPORT TRADE
EXPORT VOLUMES
EXPORTS
FACTOR DEMAND
FINAL GOODS
FINANCIAL SECTOR
FINANCIAL SERVICES
FOREIGN DIRECT INVESTMENT
FOREIGN ENTRY
FOREIGN FIRMS
FOREIGN INVESTMENT
FOREIGN MARKETS
FOREIGN OWNERSHIP
FOREIGN SALES
FOREIGN SUPPLIERS
FREE GOODS
FRICTIONAL UNEMPLOYMENT
FULL LIBERALIZATION
GDP
GENERAL EQUILIBRIUM MODEL
GLOBAL INTEGRATION
GOVERNMENT EXPENDITURES
GRAVITY MODEL
IMPERFECT COMPETITION
IMPORT CONSUMPTION
IMPORT PRICES
IMPORTS
INCOME
INCOME ELASTICITIES
INEFFICIENCY
INSURANCE
INTEREST RATE
INTERMEDIATE IMPORTS
INTERMEDIATE INPUTS
INTERNATIONAL PRICES
INTERNATIONAL STANDARDS
INTERNATIONAL TRADE
INVESTMENT FLOWS
INVESTMENT LIBERALIZATION
LABOR FORCE
LAWS
LIBERALIZATION OF TRADE
LIBERALIZATION OF TRADE IN GOODS
LOST TARIFF REVENUES
MARGINAL COST
MARGINAL COST CONDITION
MARGINAL COSTS
MARKET POWER
MARKET STRUCTURE
POLICY RESEARCH
PREFERENTIAL TREATMENT
PRICE ELASTICITY
PRICE ELASTICITY OF DEMAND
PRICE INCREASES
PRIMARY FACTORS
PRIVATIZATION
PRODUCERS
PRODUCT DIFFERENTIATION
PRODUCTION FUNCTION
PRODUCTION FUNCTIONS
PRODUCTIVITY
PUBLIC SERVICES
REAL EXCHANGE RATE
REAL INCOME
REAL PRICES
REGIONAL TRADE
RETURN ON CAPITAL
SAVINGS
SERVICE DELIVERY
SPECIALIZATION
SUBSIDIARIES
TARIFF CLASSIFICATION
TARIFF DATA
TARIFF RATES
TAX RATES
TAX REVENUES
TELECOMMUNICATIONS
TOTAL OUTPUT
TRADE AGREEMENT
TRADE BALANCE
TRADE COSTS
TRADE LIBERALIZATION
TRADE PATTERNS
TRADE REFORM
TRADE REFORMS
TRANSPORT
UNEMPLOYMENT
UNILATERAL TRADE
UNILATERAL TRADE LIBERALIZATION
UTILITY FUNCTION
VALUE ADDED
WAGES
WELFARE GAINS
WELFARE IMPACTS
WORLD TRADE
WORLD TRADE ORGANIZATION
Konan, Denise Eby
Maskus, Keith E.
Quantifying the Impact of Services Liberalization in a Developing Country
geographic_facet Middle East and North Africa
Tunisia
relation Policy Research Working Paper;No. 3193
description The authors consider how service liberalization differs from goods liberalization in terms of welfare, the level and composition of output, and factor prices within a developing economy, in this case Tunisia. Despite recent movements toward liberalization, Tunisian service sectors remain largely closed to foreign participation and are provided at high cost relative to many developing nations. The authors develop a computable general equilibrium (CGE) model of the Tunisian economy with multiple products and services and three trading partners. They model goods liberalization as the unilateral removal of product tariffs. Restraints on services trade involve both restrictions on cross-border supply (mode 1 in the GATS) and on foreign ownership through foreign direct investment (mode 3 in the GATS). The former are modeled as tariff-equivalent price wedges while the latter are comprised of both monopoly-rent distortions (arising from imperfect competition among domestic producers) and inefficiency costs (arising from a failure of domestic service providers to adopt least-cost practices). They find that goods-trade liberalization yields a gain in aggregate welfare and reorients production toward sectors of benchmark comparative advantage. However, a reduction of services barriers in a way that permits greater competition through foreign direct investment generates larger welfare gains. Service liberalization also requires lower adjustment costs, measured in terms of sectoral movement of workers, than does goods-trade liberalization. And it tends to increase economic activity in all sectors and raise the real returns to both capital and labor. The overall welfare gains of comprehensive service liberalization amount to more than 5 percent of initial consumption. The bulk of these gains come from opening markets for finance, business services, and telecommunications. Because these are key inputs into all sectors of the economy, their liberalization cuts costs and drives larger efficiency gains overall. The results point to the potential importance of deregulating services provision for economic development.
format Publications & Research :: Policy Research Working Paper
author Konan, Denise Eby
Maskus, Keith E.
author_facet Konan, Denise Eby
Maskus, Keith E.
author_sort Konan, Denise Eby
title Quantifying the Impact of Services Liberalization in a Developing Country
title_short Quantifying the Impact of Services Liberalization in a Developing Country
title_full Quantifying the Impact of Services Liberalization in a Developing Country
title_fullStr Quantifying the Impact of Services Liberalization in a Developing Country
title_full_unstemmed Quantifying the Impact of Services Liberalization in a Developing Country
title_sort quantifying the impact of services liberalization in a developing country
publisher World Bank, Washington, DC
publishDate 2014
url http://documents.worldbank.org/curated/en/2003/01/2880185/quantifying-impact-services-liberalization-developing-country
http://hdl.handle.net/10986/17425
_version_ 1764437008122380288
spelling okr-10986-174252021-04-23T14:03:37Z Quantifying the Impact of Services Liberalization in a Developing Country Konan, Denise Eby Maskus, Keith E. SERVICES GOODS TRADE LIBERALIZATION WELFARE ECONOMICS OUTPUTS FACTOR PRICES DEVELOPING COUNTRIES TARIFFS FOREIGN DIRECT INVESTMENTS MONOPOLISTIC COMPETITION COMPETITIVENESS DOMESTIC TRADE AGGREGATE VARIABILITY DEREGULATION ECONOMIC DEVELOPMENT ACCOUNTING ACCOUNTING PRACTICES ACTUAL COSTS AGGREGATE IMPORT EXPENDITURES AGGREGATE TRADE AGGREGATE TRADE FLOWS AGREEMENT ON TRADE AGRICULTURE BALANCE OF PAYMENTS BANKING SYSTEM BENCHMARK BENCHMARK DATA BENCHMARK EQUILIBRIUM BENCHMARK TRADE ELASTICITIES BENCHMARKS BORDER TRADE CAPITAL ACCOUNT CAPITAL GAINS CAPITAL INCREASE CAPITAL INPUTS CAPITAL STOCK CAPITAL SUBSTITUTION CARTEL CARTELS CD CHANGES IN TRADE COMPARATIVE ADVANTAGE COMPETITIVE MARKET COMPETITIVE MARKETS COMPETITIVENESS CONSTANT ELASTICITY OF SUBSTITUTION CONSTANT ELASTICITY OF TRANSFORMATION CONSTANT RETURNS TO SCALE CONSUMER PRICE INDEX CONSUMER PRICES CONSUMERS COUNTRY OF ORIGIN CURRENT ACCOUNT CURRENT ACCOUNT BALANCE CURRENT ENVIRONMENT CUSTOMS PROCEDURES DEREGULATION DOMESTIC PRODUCERS DOMESTIC SUPPLIERS ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC EFFICIENCY ECONOMIC GROWTH ECONOMIC RENTS ECONOMICS ECONOMIES OF SCALE ECONOMISTS ELASTICITIES ELASTICITY OF SUBSTITUTION EMPIRICAL EVIDENCE EMPIRICAL INFORMATION EMPIRICAL STUDIES EQUILIBRIUM EQUIVALENT VARIATION EXCHANGE RATE EXPORT INDUSTRIES EXPORT SECTORS EXPORT TRADE EXPORT VOLUMES EXPORTS FACTOR DEMAND FINAL GOODS FINANCIAL SECTOR FINANCIAL SERVICES FOREIGN DIRECT INVESTMENT FOREIGN ENTRY FOREIGN FIRMS FOREIGN INVESTMENT FOREIGN MARKETS FOREIGN OWNERSHIP FOREIGN SALES FOREIGN SUPPLIERS FREE GOODS FRICTIONAL UNEMPLOYMENT FULL LIBERALIZATION GDP GENERAL EQUILIBRIUM MODEL GLOBAL INTEGRATION GOVERNMENT EXPENDITURES GRAVITY MODEL IMPERFECT COMPETITION IMPORT CONSUMPTION IMPORT PRICES IMPORTS INCOME INCOME ELASTICITIES INEFFICIENCY INSURANCE INTEREST RATE INTERMEDIATE IMPORTS INTERMEDIATE INPUTS INTERNATIONAL PRICES INTERNATIONAL STANDARDS INTERNATIONAL TRADE INVESTMENT FLOWS INVESTMENT LIBERALIZATION LABOR FORCE LAWS LIBERALIZATION OF TRADE LIBERALIZATION OF TRADE IN GOODS LOST TARIFF REVENUES MARGINAL COST MARGINAL COST CONDITION MARGINAL COSTS MARKET POWER MARKET STRUCTURE POLICY RESEARCH PREFERENTIAL TREATMENT PRICE ELASTICITY PRICE ELASTICITY OF DEMAND PRICE INCREASES PRIMARY FACTORS PRIVATIZATION PRODUCERS PRODUCT DIFFERENTIATION PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PUBLIC SERVICES REAL EXCHANGE RATE REAL INCOME REAL PRICES REGIONAL TRADE RETURN ON CAPITAL SAVINGS SERVICE DELIVERY SPECIALIZATION SUBSIDIARIES TARIFF CLASSIFICATION TARIFF DATA TARIFF RATES TAX RATES TAX REVENUES TELECOMMUNICATIONS TOTAL OUTPUT TRADE AGREEMENT TRADE BALANCE TRADE COSTS TRADE LIBERALIZATION TRADE PATTERNS TRADE REFORM TRADE REFORMS TRANSPORT UNEMPLOYMENT UNILATERAL TRADE UNILATERAL TRADE LIBERALIZATION UTILITY FUNCTION VALUE ADDED WAGES WELFARE GAINS WELFARE IMPACTS WORLD TRADE WORLD TRADE ORGANIZATION The authors consider how service liberalization differs from goods liberalization in terms of welfare, the level and composition of output, and factor prices within a developing economy, in this case Tunisia. Despite recent movements toward liberalization, Tunisian service sectors remain largely closed to foreign participation and are provided at high cost relative to many developing nations. The authors develop a computable general equilibrium (CGE) model of the Tunisian economy with multiple products and services and three trading partners. They model goods liberalization as the unilateral removal of product tariffs. Restraints on services trade involve both restrictions on cross-border supply (mode 1 in the GATS) and on foreign ownership through foreign direct investment (mode 3 in the GATS). The former are modeled as tariff-equivalent price wedges while the latter are comprised of both monopoly-rent distortions (arising from imperfect competition among domestic producers) and inefficiency costs (arising from a failure of domestic service providers to adopt least-cost practices). They find that goods-trade liberalization yields a gain in aggregate welfare and reorients production toward sectors of benchmark comparative advantage. However, a reduction of services barriers in a way that permits greater competition through foreign direct investment generates larger welfare gains. Service liberalization also requires lower adjustment costs, measured in terms of sectoral movement of workers, than does goods-trade liberalization. And it tends to increase economic activity in all sectors and raise the real returns to both capital and labor. The overall welfare gains of comprehensive service liberalization amount to more than 5 percent of initial consumption. The bulk of these gains come from opening markets for finance, business services, and telecommunications. Because these are key inputs into all sectors of the economy, their liberalization cuts costs and drives larger efficiency gains overall. The results point to the potential importance of deregulating services provision for economic development. 2014-03-27T19:43:54Z 2014-03-27T19:43:54Z 2004-01 http://documents.worldbank.org/curated/en/2003/01/2880185/quantifying-impact-services-liberalization-developing-country http://hdl.handle.net/10986/17425 English en_US Policy Research Working Paper;No. 3193 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Middle East and North Africa Tunisia