Konan, Denise EbyMaskus, Keith E.2014-03-272014-03-272004-01https://hdl.handle.net/10986/17425The 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.en-USCC BY 3.0 IGOSERVICESGOODSTRADE LIBERALIZATIONWELFARE ECONOMICSOUTPUTSFACTOR PRICESDEVELOPING COUNTRIESTARIFFSFOREIGN DIRECT INVESTMENTSMONOPOLISTIC COMPETITIONCOMPETITIVENESSDOMESTIC TRADEAGGREGATE VARIABILITYDEREGULATIONECONOMIC DEVELOPMENTACCOUNTINGACCOUNTING PRACTICESACTUAL COSTSAGGREGATE IMPORT EXPENDITURESAGGREGATE TRADEAGGREGATE TRADE FLOWSAGREEMENT ON TRADEAGRICULTUREBALANCE OF PAYMENTSBANKING SYSTEMBENCHMARKBENCHMARK DATABENCHMARK EQUILIBRIUMBENCHMARK TRADE ELASTICITIESBENCHMARKSBORDER TRADECAPITAL ACCOUNTCAPITAL GAINSCAPITAL INCREASECAPITAL INPUTSCAPITAL STOCKCAPITAL SUBSTITUTIONCARTELCARTELSCDCHANGES IN TRADECOMPARATIVE ADVANTAGECOMPETITIVE MARKETCOMPETITIVE MARKETSCOMPETITIVENESSCONSTANT ELASTICITY OF SUBSTITUTIONCONSTANT ELASTICITY OF TRANSFORMATIONCONSTANT RETURNS TO SCALECONSUMER PRICE INDEXCONSUMER PRICESCONSUMERSCOUNTRY OF ORIGINCURRENT ACCOUNTCURRENT ACCOUNT BALANCECURRENT ENVIRONMENTCUSTOMS PROCEDURESDEREGULATIONDOMESTIC PRODUCERSDOMESTIC SUPPLIERSECONOMIC ACTIVITYECONOMIC DEVELOPMENTECONOMIC EFFICIENCYECONOMIC GROWTHECONOMIC RENTSECONOMICSECONOMIES OF SCALEECONOMISTSELASTICITIESELASTICITY OF SUBSTITUTIONEMPIRICAL EVIDENCEEMPIRICAL INFORMATIONEMPIRICAL STUDIESEQUILIBRIUMEQUIVALENT VARIATIONEXCHANGE RATEEXPORT INDUSTRIESEXPORT SECTORSEXPORT TRADEEXPORT VOLUMESEXPORTSFACTOR DEMANDFINAL GOODSFINANCIAL SECTORFINANCIAL SERVICESFOREIGN DIRECT INVESTMENTFOREIGN ENTRYFOREIGN FIRMSFOREIGN INVESTMENTFOREIGN MARKETSFOREIGN OWNERSHIPFOREIGN SALESFOREIGN SUPPLIERSFREE GOODSFRICTIONAL UNEMPLOYMENTFULL LIBERALIZATIONGDPGENERAL EQUILIBRIUM MODELGLOBAL INTEGRATIONGOVERNMENT EXPENDITURESGRAVITY MODELIMPERFECT COMPETITIONIMPORT CONSUMPTIONIMPORT PRICESIMPORTSINCOMEINCOME ELASTICITIESINEFFICIENCYINSURANCEINTEREST RATEINTERMEDIATE IMPORTSINTERMEDIATE INPUTSINTERNATIONAL PRICESINTERNATIONAL STANDARDSINTERNATIONAL TRADEINVESTMENT FLOWSINVESTMENT LIBERALIZATIONLABOR FORCELAWSLIBERALIZATION OF TRADELIBERALIZATION OF TRADE IN GOODSLOST TARIFF REVENUESMARGINAL COSTMARGINAL COST CONDITIONMARGINAL COSTSMARKET POWERMARKET STRUCTUREPOLICY RESEARCHPREFERENTIAL TREATMENTPRICE ELASTICITYPRICE ELASTICITY OF DEMANDPRICE INCREASESPRIMARY FACTORSPRIVATIZATIONPRODUCERSPRODUCT DIFFERENTIATIONPRODUCTION FUNCTIONPRODUCTION FUNCTIONSPRODUCTIVITYPUBLIC SERVICESREAL EXCHANGE RATEREAL INCOMEREAL PRICESREGIONAL TRADERETURN ON CAPITALSAVINGSSERVICE DELIVERYSPECIALIZATIONSUBSIDIARIESTARIFF CLASSIFICATIONTARIFF DATATARIFF RATESTAX RATESTAX REVENUESTELECOMMUNICATIONSTOTAL OUTPUTTRADE AGREEMENTTRADE BALANCETRADE COSTSTRADE LIBERALIZATIONTRADE PATTERNSTRADE REFORMTRADE REFORMSTRANSPORTUNEMPLOYMENTUNILATERAL TRADEUNILATERAL TRADE LIBERALIZATIONUTILITY FUNCTIONVALUE ADDEDWAGESWELFARE GAINSWELFARE IMPACTSWORLD TRADEWORLD TRADE ORGANIZATION10.1596/1813-9450-3193