Services Trade and Domestic Regulation

Henk Kox and Hildegunn Nordås

No 49, OECD Trade Policy Papers from OECD Publishing

Abstract: This paper argues that regulatory measures affect the fixed cost of entering a market as well as the variable costs of servicing that market. Moreover, differences in regulation among countries often imply that firms have to incur entry costs in every new market. Indicators of regulatory intensity and heterogeneity are introduced in a gravity model and their impact on market entry and subsequent trade flows estimated for total services, business services and financial services. It is found that regulatory heterogeneity has a relatively large negative impact on both market entry and subsequent trade flows. Further, regulatory barriers have a negative effect on the local services sectors’ export performance. Finally it is found that regulations that aims at correcting market failure can have a positive impact on trade. It is concluded that services trade liberalization and regulatory reforms are complementary in creating competitive services markets.

Date: 2007-02-14
New Economics Papers: this item is included in nep-int and nep-reg
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Citations: View citations in EconPapers (46)

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https://doi.org/10.1787/154365452587 (text/html)

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Working Paper: Services trade and domestic regulation (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:oec:traaab:49-en

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