The Effect of Service Trade Barriers

Three decades of research on trade costs in goods have produced valuable insights, but despite a growing literature, key knowledge about fundamental drivers and consequences of service trade barriers is not available. This project aims at contributing research to fill part of the gap relating to goods trade.

In broad terms, the project promises to make contributions to two bigger areas of interest: the determinants of services trade barriers and their consequences.


On service regulations, the first line of interest will be concerned with the determinants of a variety of services trade barriers (the binary presence and continuous degree of regulations, the binary existence and continuous scope of agreements, the timing of imposition and removal of barriers and agreements).


The second line of research will address issues of the functional form of the relationship between individual service barrier measures and service trade costs. For instance, with goods trade we know that ad-valorem tariffs and geographical barriers (distance, common cultural and historical indicators) can be aggregated in a more or less log-additive way into trade costs. The measurement of service trade barrier variables is much less straightforward than that of goods trade barriers. Hence, it is unclear how the available measures can be properly aggregated into a compact measure of services trade costs. In that regard, our research will contribute to the understanding of the relevance and proper aggregation of traditional measures into one bilateral service trade cost measure (per service type and aggregated across all services). Moreover, we know that goods trade agreements are determined by economic fundamentals as predicted by economic theory. Yet, the nature of services is very different from that of goods and we do not know much about the determination of service trade agreements. Our research will contribute to this agenda both along theoretical and empirical lines.

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