The Division and Size of Gains from Liberalization of Service Networks

24 Pages Posted: 26 Jun 2000 Last revised: 13 Sep 2004

See all articles by Keshab Bhattarai

Keshab Bhattarai

University of Hull

John Whalley

University of Western Ontario - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute); Centre for International Governance and Innovation (CIGI)

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Date Written: August 1998

Abstract

This paper emphasizes the different nature of cross border liberalization in network related services, such as telecoms, compared to liberalization in goods. In the presence of network externalities, it argues that if two disjoint country service networks involving a small and large country are connected as part of international liberalization, the per capita gain for the small country from access to a large network will be large, and the per capita gain for the large country will be small. Benefits of liberalization in network related serv ices, unlike goods, are more likely to be approximately equally divided between large and small countries than is true of trade in goods, where benefits accrue disproportionately to the small country. We also argue that non-cooperation in network related services trade may involve more extreme retaliation than suggested for trade in goods from the optimal tariff literature, so that relative to a non-cooperative outcome, gains from liberalization in network related services become larger than from liberalization in goods. An empirical implementation of global telecoms liberalization for the US, Europe, Canada, and the Rest of the World using the framework developed in the paper shows larger gains to larger regions, consistent with the theme of the paper that goods and services liberalization differ.

Suggested Citation

Bhattarai, Keshab R. and Whalley, John, The Division and Size of Gains from Liberalization of Service Networks (August 1998). NBER Working Paper No. w6712. Available at SSRN: https://ssrn.com/abstract=226367

Keshab R. Bhattarai

University of Hull ( email )

Cottingham Road
Hull
Hull HU6 7RX
United Kingdom

HOME PAGE: http://www.hull.ac.uk/php/ecskrb

John Whalley (Contact Author)

University of Western Ontario - Department of Economics ( email )

London, Ontario N6A 5B8
Canada
519-661-3509, ext. 83509 (Phone)
519-661-3666 (Fax)

HOME PAGE: http://www.ssc.uwo.ca/economics/faculty/

National Bureau of Economic Research (NBER)

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CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Centre for International Governance and Innovation (CIGI) ( email )

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Waterloo, Ontario N2L 6C2
Canada

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