The presentation exposes recent research findings on the heterogeneous effects of import restrictions in services trade.
The study uses the recent database of detailed import restrictions published by the World Bank to assess the impediments to trade services based on bilateral sector-level service flows from the World Trade organization. As opposed to studies relying on aggregated indexes of restrictiveness levels, this research makes use of the discrete restrictiveness levels on bilateral services flows based on a gravity model, and derive tariff equivalents in three service sectors (Other Business Services, Banking and Insurance). We preserve the discrete nature of the restrictions to import, which are provided by the World Bank - WB (see Borchert et al., 2014).
For each sector-country combination, we evaluate restrictiveness using four discrete levels, from totally open to closed. This approach allows us track the effect of the specific import restrictions in place. We highlight their non-linear impact on services flows showing threshold effects. In addition, we uncover the trade stimulating effect of minor import restrictions on a restriction-free environment. Minor restrictions, in comparison to restriction-free environments, generate a trade-facilitating effect in certain sectors as regulations may address market imperfections.
Based on the restrictions that applies in each importing country and sector, we finally derive ad-valorem tariff equivalents.