Journal Article

No. 2015-42 | November 24, 2015
What Determines Whether Preferential Liberalization of Barriers against Foreign Investors in Services Are Beneficial or Immizerising: Application to the Case of Kenya PDF Icon

Abstract

Despite the fact that many modern preferential trade agreements include commitments to foreign investors in imperfectly competitive services sectors, the literature has not established conditions under which these agreements are beneficial or harmful. The authors fill that void by developing a model with monopolistic competition and foreign direct investment in services with Dixit-Stiglitz endogenous productivity effects from additional varieties. They specify a numerical model, with probability distributions of all parameters. The model is executed 30,000 times, and results are reported as probability of an outcome, based on the sample distribution. In order to ground the results in reality, the authors apply the model to Kenya. They show that preferential commitments in services could be immizerising. Losses are more likely the greater the share of initial rent capture on the services barriers in the home country and the more technologically advanced are the excluded regions relative to the partner region.

JEL Classification

F12 F13 F14 F15 F23 F47 C68 L16

Citation

Edward J. Balistreri, Jesper Jensen, and David Tarr (2015). What Determines Whether Preferential Liberalization of Barriers against Foreign Investors in Services Are Beneficial or Immizerising: Application to the Case of Kenya. Economics: The Open-Access, Open-Assessment E-Journal, 9 (2015-42): 1—134. http://dx.doi.org/10.5018/economics-ejournal.ja.2015-42

Assessment

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