Quantifying the Impact of Services Liberalization in a Developing Country.” World Bank Policy Research Working Paper 3193

Abstract: This paper considers how service liberalization differs from that of goods liberalization in terms of welfare, the composition of output, and growth within a developing economy. Trade liberalization reorients production toward sectors of benchmark comparative advantage. We find that a reduction of services barriers in a way that permits competition through foreign direct investment tends to increase economic activity more evenly across sectors. As a result, service liberalization requires lower adjustment costs, measured in terms of sectoral movement of workers, than does goods trade liberalization. Overall welfare gains of comprehensive service liberalization generally outweigh those available from goods trade liberalization