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Mode 4 restrictiveness and services trade

Author

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  • Anirudh Shingal

    (S.P. Jain Institute of Management & Research, Mumbai and European University Institute, Florence. Address for correspondence: S.P. Jain Institute of Management & Research (SPJIMR))

Abstract

Despite the importance of services trade and “servicification” of economic activity, “Mode 4” accounted for only 2.9% of total services trade in 2017. While existing literature has estimated services trade costs, effects of barriers to Mode 4 trade have not yet been quantified. We contribute by constructing a composite index to quantify regulatory barriers to the movement of service suppliers, using qualitative information embedded in OECD data on services trade restrictions, and examining its relationship with services trade. Structural gravity estimates suggest that a one standard deviation rise in Mode 4 restrictiveness reduces bilateral services exports by 8%; the adverse effects are even larger for intermediate services exports. Results using aggregate data show that the constructed index is negatively correlated with services imports delivered non-digitally alluding to complementarities between modes of supply and cross-modal “effects”. Moreover, there is considerable heterogeneity in the results across services sectors in both aggregate and bilateral analysis.

Suggested Citation

  • Anirudh Shingal, 2023. "Mode 4 restrictiveness and services trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 159(3), pages 757-786, August.
    • Handle: RePEc:spr:weltar:v:159:y:2023:i:3:d:10.1007_s10290-022-00481-2
    DOI: 10.1007/s10290-022-00481-2
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    References listed on IDEAS

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    More about this item

    Keywords

    Services trade; Mode 4; Services suppliers; OECD STRI; Gravity model;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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