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WIOD conference, 27.05.2010 Evolution of Trade Costs in Services Sectors: Gravity Modeling Approach...
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Transcript of WIOD conference, 27.05.2010 Evolution of Trade Costs in Services Sectors: Gravity Modeling Approach...
WIOD conference, 27.05.2010
www.wiiw.ac.at
Evolution of Trade Costs in Services
Sectors: Gravity Modeling Approach
Joseph Francois, Olga Pindyuk
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Contents
Motivation Data description Modeling approach First results
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Barriers to services trade
Many services trade barriers primarily affect fixed
costs of service providers and are sunk market-entry
costs Bilateral heterogeneity of regulation in each pair of
countries matters- Even when services regulations are not discriminatory and
were designed to meet legitimate economic or social objectives, they may they still hamper trade as regulatory requirements in a given export market are additional to the ones a service provider faces at home and other export markets
4
EU and services trade
EU members have quite heterogeneous services
regulation Still the most advanced services trade liberalization
among existing RTAs Thus we should expect to see positive effect of the EU
membership on services trade of new members
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Data description
Dataset based on the Eurostat, OECD, UN, and IMF
data Bilateral services trade flows for 244 reporting
countries and 244 partners. In total (1995-2007) we have 1,393,805 observations,
11% of observations are missing values, and 35% of
observations are zero flows.
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Data description
BOP Sector name
200 Total services
205 Transport
236 Travel
245 Post and telecommunications
247 Telecommunications
249 Construction
253 Insurance
260 Financial intermediation
268 Other business services
287 Personal, cultural, recreational services
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Sectoral structure of NMS services trade2003
2007
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Geographical structure of NMS exportsUSD bn
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Geographical structure of NMS exports
2003 2004
DEU 18.6 NOR 7.0
GBR 8.7 CHE 6.3
AUT 7.4 RUS 5.9
ITA 6.0 HRV 4.4
RUS 5.9 USA 4.3
USA 5.8 JPN 3.9
HRV 4.8 CAN 3.9
FRA 4.1 ISR 3.4
NLD 3.5 AUS 3.3
CZE 2.3 TUR 3.2
Other 32.9 Other 54.5
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Data examples - total services importsYear Reporter Partner Value, USD mln Source
2003 CZE CHE 249.9 UN
2004 CZE CHE 1930.6 UN
2003 CZE NOR 35.0 OECD
2004 CZE NOR 4770.0 OECD
2003 CZE RUS 369.1 OECD
2004 CZE RUS 4441.0 OECD
2003 HUN CAN 56.6 UN
2004 HUN CAN 3734.9 OECD
2003 HUN JPN 84.8 OECD
2004 HUN JPN 4038.5 OECD
2003 SVK CHE 140.0 OECD
2004 SVK CHE 1401.2 OECD
2003 SVK NOR 35.1 UN
2004 SVK NOR 1502.9 UN Mirror
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Modeling approach
Assuming that import values depend on a mix of
importer characteristics, exporter characteristics, and
bilateral properties, we specify total trade as follows:
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Modeling approach
We group effects as follows:
Table 1. Classification of effects
We only are interested in the first cell. We can control
for everything else with exporter dummies, importer
dummies, and pair-wise time invariant dummies
Pair-wise Exporter Importer
Time varying
Time invariant
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Modeling approach
We take an average of Mijt across time for country
pairs. This yields μi j . We then take the difference of
Mijt from this average. This yields ψ1ijt.
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Modeling approach
Next we take an exporter average: the average of ψ1ijt
across importers for each exporter in each period. This
yields μit. We then take the difference of ψ1ijt from this
average. This yields ψ2ijt.
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Modeling approach
We have now eliminated both time-invariant pair-wise
effects, and time-varying exporter effects. Next we
take an importer average: the average of ψ2ijt across
exporters for each importer in each period. This yields
μjt. We then take the difference of ψ2ijt from this
average. This yields ψ3ijt.
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Modeling approach
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Modeling approach 2 stage estimation procedure:
- Heckman selection to account for zero flows
- “Difference-in difference-in difference” regression (demeaned log of imports value as a dependent variable; pair-wise dummies old-old, new-new, old-new, new-old, third-old, third-new on the RHS)
Separate regressions for 2 periods: 1999-2003 and 2004-2007 Based on coefficients of the pair-wise dummies we calculate
percentage changes in bilateral trade relative to global
baseline These changes cannot be explained by “gravity fundamentals”,
but are attributed to trade costs
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1999-2003
BOPS 200 205 236 245 247 249 253 260 268 287
old_old 0.21% 0.05% 0.48% -1.67% 5.83% 0.96% -2.93% -5.43% -0.13% -1.30%
old_new -1.28% -0.80% 2.98% 3.89% 15.78% 2.84% -5.02% 29.80% 2.90% 9.17%
new_new 10.52% 4.45% 0.58%
new_old 0.67% 0.47% 2.12% 0.45% -11.60% -1.27% 4.95% 10.05% 0.24% 5.96%
third_old -0.09% 0.17% -0.40% 0.53% 0.19% -0.40% -0.04% 0.26% -0.15% -0.27%
third_new -1.79% -0.49% -1.76% -0.62% -6.12% 15.21% 1.65% -14.29% 0.57% 1.10%
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2004-2007
BOPS 200 205 236 245 247 249 253 260 268 287
old_old -5.14% -1.53% -7.54% -1.17% -4.81% 1.18% 0.66% -0.70% -7.61% -3.87%
old_new 5.33% 2.61% 7.95% 5.71% 2.49% 9.71% 23.27% 22.48% 1.54% 13.73%
new_new -8.14% -3.15% -10.13%
new_old 6.69% 2.10% 11.93% 1.51% 3.84% -0.90% -1.04% 1.57% 7.24% 14.42%
third_old 0.03% -0.09% -0.60% 0.14% 0.40% 0.01% -0.12% 0.09% 0.46% 0.28%
third_new 0.01% -0.22% -0.14% -0.54% 0.07% -1.13% -4.27% -2.92% -0.24% -1.14%
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Conclusions
NMS have been re-orienting their services trade after the EU
accession: from trading relatively more with each other to
trading relatively more with old member states- Costs of trade with the old member states have decreased
Old member states started to trade relatively less with each
other after the EU enlargement- Costs of trade between the old member states did not decrease as
much as costs of trade between old-new
Trade diversion between NMS and third countries continues
after the accession, but to smaller extent
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Further work
Find explanations of the data issues Make a separate dummy for outliers (NOR, CHE,
USA, HRV, RUS, JPN, CAN)?