Quantifying the Impact of Services Liberalization in a Developing Country
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World Bank, Washington, DC
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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.
Palabras clave
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