Landlocked or Policy Locked? How Services Trade Protection Deepens Economic Isolation

41 Pages Posted: 20 Apr 2016

See all articles by Ingo Borchert

Ingo Borchert

World Bank - Development Research Group (DECRG)

Batshur Gootiiz

World Bank

Arti Grover Goswami

World Bank

Aaditya Mattoo

World Bank - Development Research Group (DECRG)

Date Written: January 1, 2012

Abstract

A new cross-country database on services policy reveals a perverse pattern: many landlocked countries restrict trade in the very services that connect them with the rest of the world. On average, telecommunications and air-transport policies are significantly more restrictive in landlocked countries than elsewhere. The phenomenon is most starkly visible in Sub-Saharan Africa and is associated with lower levels of political accountability. This paper finds evidence that these policies lead to more concentrated market structures and more limited access to services than these countries would otherwise have, even after taking into account the influence of geography and incomes, and the possibility that policy is endogenous. Even moderate liberalization in these sectors could lead to an increase of cellular subscriptions by 7 percentage points and a 20-percent increase in the number of flights. Policies in other countries, industrial and developing alike, also limit competition in international transport services. Hence, "trade-facilitating" investments under various "aid-for-trade" initiatives are likely to earn a low return unless they are accompanied by meaningful reform in these services sectors.

Keywords: Transport Economics Policy & Planning, Markets and Market Access, Public Sector Corruption & Anticorruption Measures, Economic Theory & Research, ICT Policy and Strategies

Suggested Citation

Borchert, Ingo and Gootiiz, Batshur and Goswami, Arti Grover and Mattoo, Aaditya, Landlocked or Policy Locked? How Services Trade Protection Deepens Economic Isolation (January 1, 2012). World Bank Policy Research Working Paper No. 5942. Available at SSRN: https://ssrn.com/abstract=1983103

Ingo Borchert (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

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Batshur Gootiiz

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Arti Grover Goswami

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States

Aaditya Mattoo

World Bank - Development Research Group (DECRG) ( email )

1818 H Street, N.W.
Room MC 3-327
Washington, DC 20433
United States
202-458-8047 (Phone)
202-676-9810 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/amattoo

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