Publication: Modeling Services Liberalization: The Case of Tanzania
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Published
2010
ISSN
1225651X
Date
2012-03-30
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Despite economic theory and empirical literature that have shown that wide availability of business services contributes significantly to productivity gains and growth, economic modelers have been slow to meaningfully incorporate services into their models. This paper employs a 52-sector, small, open-economy computable general equilibrium model of the Tanzanian economy to assess the impact of the liberalization of regulatory barriers against foreign and domestic business service providers in Tanzania. The model incorporates foreign direct investment in services, and productivity effects in both goods and services markets endogenously through a Dixit-Stiglitz framework. The paper summarizes and builds on the surveys and policy notes of the regulatory regimes in business services in Tanzania, and estimates the ad valorem equivalent of barriers to foreign direct investment. The paper estimates significant gains to Tanzania from services reforms, especially in banking, maritime and road transportation. Decomposition exercises reveal that the largest gains will derive from liberalization of non-discriminatory regulatory barriers.
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Publication Modeling Services Liberalization : The Case of Tanzania(Washington, DC: World Bank, 2008-12)This paper employs a 52-sector, small, open-economy computable general equilibrium model of the Tanzanian economy to assess the impact of the liberalization of regulatory barriers against foreign and domestic business service providers in Tanzania. The model incorporates productivity effects in both goods and services markets endogenously, through a Dixit-Stiglitz framework. It summarizes policy notes on the key business service sectors that were prepared for this work, and estimates the ad valorem equivalent of barriers to foreign direct investment based on these policy notes and detailed questionnaires completed by specialists in Tanzania. The authors estimate that Tanzania will gain about 5.3 percent of the value of Tanzanian consumption in the medium run (or about 4.8 percent of gross domestic product) from a full reform package that also includes uniform tariffs. The estimated gains increase to about 16 percent of consumption in the long-run, steady-state model, where the impact on the accumulation of capital from an improvement in the productivity of capital is taken into account. Decomposition exercises reveal that the largest gains to Tanzania will derive from liberalization of costly regulatory barriers that are non-discriminatory in their impacts between Tanzanian and multinational service providers.Publication Deep Trade Policy Options for Armenia : The Importance of Services, Trade Facilitation and Standards Liberalization(2011-05-01)This paper develops an innovative 21 sector computable general equilibrium model of Armenia to assess the impact on Armenia of a Deep and Comprehensive Free Trade Agreement with the European Union, as well as further regional or multilateral trade policy commitments. The analysis finds that such an agreement with the European Union will likely result in substantial gains to Armenia, but shows that the gains derive from the deep aspects of the agreement. In order of importance, the sources of the gains are: (i) trade facilitation and reduction in border costs; (ii) services liberalization; and (iii) standards harmonization. A shallow agreement with the European Union that focuses only on preferential tariff liberalization in goods will likely lead to small losses to Armenia primarily due to a loss of productivity from lost varieties of technologies from the rest of the world region in manufactured products. Additional gains can be expected in the long run from an improvement in the investment climate. The authors estimate only small gains from a services agreement with countries of the Commonwealth of Independent States, but significant gains from expanding services liberalization multilaterally.Publication The Impact of Liberalizing Barriers to Foreign Direct Investment in Services: The Case of Russian Accession to the World Trade Organization(World Bank, Washington, D.C., 2004-09)The authors use a computable general equilibrium model of the Russian economy to assess the impact of accession to the World Trade Organization (WTO), which encompasses improved market access, tariff reduction, and reduction of barriers against multinational service providers. They assume that foreign direct investment in business services is necessary for multinationals to compete well with Russian business service providers, but cross-border service provision is also present. The model incorporates productivity effects in both goods and services markets endogenously through a Dixit-Stiglitz framework. As a result, the estimated gains from WTO accession are much larger than would be obtained from a typical model with perfect competition. The ad valorem equivalent of barriers to foreign direct investment have been estimated based on detailed questionnaires completed by specialized research institutes in Russia. The authors estimate that Russia will gain about 7.2 percent of the value of Russian consumption in the medium run from WTO accession and up to 24 percent in the long run. They estimate that the largest gains to Russia will derive from liberalization of barriers against multinational service providers. Piecemeal and systematic sensitivity analysis shows that their results are robust.Publication Modeling Services Liberalization : The Case of Kenya(World Bank, Washington, DC, 2008-03)This paper employs a 55 sector small open economy computable general equilibrium model of the Kenyan economy to assess the impact of the liberalization of regulatory barriers against foreign and domestic business service providers in Kenya. The model incorporates productivity effects in both goods and services markets endogenously, through a Dixit-Stiglitz framework. It estimates the ad valorem equivalent of barriers to foreign direct investment based on detailed questionnaires completed by specialists in Kenya. The authors estimate that Kenya will gain about 11 percent of the value of Kenyan consumption in the medium run (or about 10 percent of gross domestic product) from a full reform package that also includes uniform tariffs. The estimated gains increase to 77 percent of consumption in the long-run steady-state model, where the impact on the accumulation of capital from an improvement in the productivity of capital is taken into account. Decomposition exercises reveal that the largest gains to Kenya will derive from liberalization of costly regulatory barriers that are non-discriminatory in their impacts between Kenyan and multinational service providers.Publication Regional Trade Policy Options for Tanzania : The Importance of Services Commitments(2010-11-01)Despite the growing importance of commitments to foreign investors in services in regional trade agreements, there are no applied general equilibrium models in the literature that assess these regional impacts. This paper develops a 52 sector applied general equilibrium model of Tanzania with foreign direct investment, and uses that model to assess Tanzania's regional and multilateral trade options. The model incorporates the features of the modern theory of international trade that has shown empirically that trade and foreign direct investment can increase productivity, and trade and foreign direct investment with technologically advanced countries is especially valuable for that purpose. To assess the sensitivity of the results to parameter values, the model is executed 30,000 times, and the results are reported as confidence intervals of the sample distributions. The analysis finds that a 50 percent preferential reduction in the ad valorem equivalents of barriers in all business services by Tanzania with respect to its African regional partners would be slightly beneficial for Tanzania. But wider liberalization, with larger partners or multilaterally, it will yield much larger gains due to providing access to a much wider set of service providers. Finally, the results show that the largest gains in services would be derived from reduction of regulatory barriers that are geographically non-discriminatory.
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