Mode 4 restrictiveness and services trade

Anirudh Shingal

Review of World Economics (Weltwirtschaftliches Archiv), 2023, vol. 159, issue 3, No 7, 757-786

Abstract: Abstract Despite the importance of services trade and “servicification” of economic activity, “Mode 4” accounted for only 2.9% of total services trade in 2017. While existing literature has estimated services trade costs, effects of barriers to Mode 4 trade have not yet been quantified. We contribute by constructing a composite index to quantify regulatory barriers to the movement of service suppliers, using qualitative information embedded in OECD data on services trade restrictions, and examining its relationship with services trade. Structural gravity estimates suggest that a one standard deviation rise in Mode 4 restrictiveness reduces bilateral services exports by 8%; the adverse effects are even larger for intermediate services exports. Results using aggregate data show that the constructed index is negatively correlated with services imports delivered non-digitally alluding to complementarities between modes of supply and cross-modal “effects”. Moreover, there is considerable heterogeneity in the results across services sectors in both aggregate and bilateral analysis.

Keywords: Services trade; Mode 4; Services suppliers; OECD STRI; Gravity model (search for similar items in EconPapers)
JEL-codes: F1 F10 F13 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s10290-022-00481-2

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