The Welfare Implications of Services Liberalization in a Developing Country: Evidence from Tunisia

Nizar Jouini and Nooman Rebei

No 2013/110, IMF Working Papers from International Monetary Fund

Abstract: We propose an integrated method based on a two-sector small open economy dynamic and stochastic general equilibrium model to estimate non-tariff barriers and quantify the impact of services liberalization. The major component of trade barriers is explicitly modeled through the introduction of entry-sunk costs. Hence, liberalization is treated assuming a government's policy decision aimed at reducing those costs. Then, we estimate the model using Bayesian techniques for Tunisia and the Euro Area. The paper presents a precise quantitative evaluation of services trade barriers as the difference between entry-sunk costs in Tunisia versus the Euro Area. We find significant welfare benefits in addition to aggregate and sectoral growth gains the Tunisian economy could attain following services liberalization. Surprisingly, the goods sector is the one that benefits the most from services liberalization in the short- and long-term horizons.

Keywords: WP; aggregate output; sensitivity analysis; open economy; exchange rate; service sector production; Liberalization; trade in services and goods; general equilibrium; Bayesian estimation; welfare analysis; Tunisia; Euro Area; entry-sunk cost; liberalization impact; goods liberalization; service sector inflation; service liberalization; goods market; good-sector production growth; services output; goods production; liberalization shock; Services sector; Trade barriers; Trade liberalization; Trade in services; Service exports; Middle East; North Africa; Global (search for similar items in EconPapers)
Pages: 43
Date: 2013-05-15
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Citations: View citations in EconPapers (1)

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