OECD Trade Policy Papers

ISSN :
1816-6873 (online)
DOI :
10.1787/18166873
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This series is designed to make available to a wider readership selected trade policy studies prepared for use within the OECD.

NB. No. 1 to No. 139 were released under the previous series title OECD Trade Policy Working Papers.

 

Services Trade and Domestic Regulation You or your institution have access to this content

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Author(s):
Henk Kox1, Hildegunn Kyvik Nordås2
Author Affiliations
  • 1: CPB Netherlands Bureau for Economic Policy Analysis, Netherlands

  • 2: OECD, France

Publication Date
14 Feb 2007
Bibliographic information
No.:
49
Pages
54
DOI
10.1787/154365452587

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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.