مقررات، ساختار بازار و آزادسازی خدمات تجاری
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|19726||2007||29 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Economic Modelling, Volume 24, Issue 6, November 2007, Pages 895–923
In this paper, we develop a theoretical method to quantify the importance of regulation and market structure on the success of service trade liberalization. For this purpose, we incorporate a single imperfectly competitive service sector that can take on various market structures into a standard computational general equilibrium model. We apply our framework to analyze the impact of partial telecom liberalization in Tunisia. We show that if the regulatory environment guarantees competition, Tunisia's welfare can improve up to 0.65%. If a cartel is formed between the domestic incumbent and foreign entrant, however, Tunisia's welfare can drop up to 0.25%. Our results thus call for Tunisia among other developing countries to step up its pro-competitive regulatory reforms while liberalizing its telecom sector.
Within a long tradition of multilateral trade policy, negotiations on services trade is the ‘new kid on the block.’ First introduced about 25 years ago at the 1982 GATT Ministerial Meeting, the services policy agenda remains a sideline to more traditional cross-border trade negotiations. This is surprising as globalization relies on the availability of backbone services such as telecommunications, transportation, insurance, and financial services. A substantial multilateral agreement to liberalize trade in services therefore has the potential to unleash economic growth far beyond that achievable through the further reduction of trade barriers for goods such agriculture, electronics, or textiles. Perhaps a reason why service trade liberalization has remained on the sideline is that the potential gains (and losses) from service trade liberalization are not well understood. While the importance of services is increasingly recognized by international trade economists, empirical studies remain in scant supply for a number of reasons (Hoekman, 2006).1 For one, it is difficult to measure the international flow of services provision as multiple modes of delivery are involved. For example, certain services (e.g., local telecommunications) can only be provided through the establishment of a domestic presence. Yet, national income accounts do not systematically include data on employment, output, or sales of foreign subsidiaries. Second, international activities in key services industries are subject to restrictions on market entry, foreign ownership, and other regulatory barriers. This in combination with the high fixed costs in services sectors make service sectors imperfectly competitive. Quantifying the outcome of service trade liberalization is thus more difficult than would be implied by an estimation of a tariff or other ad valorem equivalent. It not only depends on pre-reform conditions but also on the type of new entrants, the competitive behavior of the foreign licensees upon entry into the market and the profit allocation by the foreign entrants. As a result, when an imperfectly competitive service sector is liberalized, it may lead to different market structures. It can lead to an increase in competition, but it also can induce the foreign entrant(s) to join a cartel with the domestic incumbent(s) (Francois and Wooton, 2001). Foreign firms may also share in the collection of real economic rents, and may shift these rents abroad. In this paper, we develop a theoretical method to model the joint effect of regulation and market structure on services liberalization within a computational general equilibrium (CGE) context. Existing CGE studies on service trade liberalization have largely neglected the role of market structure on the success of service trade liberalization due to theoretical complications related to introducing imperfect competition into a CGE framework. To model service trade liberalization, studies have generally incorporated tariff equivalents of impediments to service trade into standard CGE trade models. Brown et al. (1996), for example, convert Hoekman's (1996) frequency indices into an ad-valorem tariff equivalent and use this approach to simulate service trade liberalization in their multi-country Michigan Model of World Production and Trade. Hertel (1999) approximates cross-border barriers with Francois and Hoekman's (1999) gravity-equation estimates and simulates service trade liberalization in the multi-country GTAP model. Dee and Hanslow (2001), Brown and Stern (2001) and Jensen et al. (2004) take similar approaches in CGE models with endogenous FDI flows. This approach does not allow one to analyze the role of strategic behavior and market structure on the success of service trade liberalization (Whalley, 2004). In the CGE models discussed above, it is assumed that the service sectors are governed by perfect competition or large-group Dixit–Stiglitz monopolistic competition both before and after service trade liberalization. Service trade liberalization is modeled as the removal of the ad valorem tariff equivalents of the impediments of services trade. This approach is inappropriate to analyze the effects of trade liberalization in service sectors where domestic regulation limits market entry to both domestic and foreign providers for two reasons. First, especially in developing countries many backbone services sectors such as telecommunications, finance and insurance are governed by few large players. Second, recent service liberalization discussions have focused primarily on freeing up ownership restrictions rather than necessarily allowing free entry per se ( Low and Mattoo, 2000). If service liberalization only leads to partial market entry without pro-competitive regulatory reforms, then this entails a danger that the foreign firms form a cartel with domestic firms. In that case, monopoly markups do not disappear, while rents might be transferred abroad ( Low and Mattoo, 2000 and Copeland, 2002). In a recent World Bank study, Mattoo and Sauvé (2003) have thus concluded that the success of service trade liberalization is strongly related to issues of market structure and domestic regulation. In a recent study, Konan and Maskus (2006) have conducted a first attempt to quantify the role of market structure on the success of service trade liberalization in Tunisia. The authors take the simplifying assumption that service sectors are governed by perfect competition, but they identify that service trade barriers lead to two types of markups above world-best marginal cost: an inefficiency markup since more efficient foreign firms are kept out of the domestic market, and a cartel markup because the trade barriers reduce competition in the market. By comparing the welfare effects of service trade liberalization when the cartel markup disappears or remains, they are able to provide initial quantitative insights into the role of market structure on the success of service trade liberalization. The problem of introducing imperfectly competitive market structures other than Dixit–Stiglitz monopolistic competition into CGE models is largely theoretical. CGE models are based on input–output tables where industries with different elasticities of demand buy the same goods and services. To derive an imperfectly competitive firm's Lerner markup condition in such models, one is required to calculate the general equilibrium demand elasticities for all users and weight them appropriately. A recent contribution from Hoffmann (2002) demonstrates the complexities that are involved with calculating such Lerner markup rules under Cournot competition. He shows that a firm uses a weighted average of the different buyers' general equilibrium elasticities of demand to maximize profits, where the weights equal the share sold to each buyer. This paper contributes to the existing literature by analyzing the role of market structure in the liberalization of one single service sector. For this purpose, we extend Hoffmann's (2002) method by incorporating a single imperfectly competitive services sector into a standard CGE framework and deriving the Lerner markup conditions for multiple market structures: monopoly, oligopoly, cartel and monopolistic competition. This extension allows us to analyze the role of market structure on the outcome of trade liberalization in a single service sector. Specifically, we assume that in the benchmark scenario only one or few domestic service providers operate in a services sector. In the counterfactuals, the services sector is liberalized and one or more licenses are provided to foreign service providers. If regulations can enforce competition between the domestic and foreign providers, then the service sector's market structure turns into a Cournot oligopoly. If regulations are weak, then the domestic and foreign providers form a cartel. This approach allows us to identify and discuss the various welfare effects associated with the liberalization of an imperfectly competitive service sector. In the second part of our paper, we introduce our method into a CGE model for Tunisia to investigate the possible welfare impacts of allowing one foreign provider to enter Tunisia's telecommunications sector. Our results highlight the role that market structure plays in Tunisia's telecommunications liberalization. According to our conservative estimates, the potential welfare implications of telecom liberalization are clearly positive if competition can be guaranteed between the two providers. Tunisia's welfare is estimated to increase up to 0.65% if the foreign provider is more efficient and does not shift its profits abroad. In contrast, telecom liberalization can lead to a welfare deterioration of up to 0.25% if the two providers collude and the foreign provider shifts its profits abroad. Our results thus call for Tunisia to step up its pro-competitive regulatory reforms while liberalizing its telecom sector.
نتیجه گیری انگلیسی
Recent academic and policy studies have uncovered a link between the success of service trade liberalization and issues of market structure and domestic regulation. CGE studies, however, have faced significant theoretical hurdles to quantify these links. In this paper, we have set a first step to bridge these hurdles by introducing a method to incorporate a single imperfectly competitive service sector that can take on various market structures into a standard CGE model. We have identified that service trade liberalization can induce four welfare effects in such a framework. It can induce a positive love-of-variety effect if services provided by domestic and foreign providers are considered to be imperfect substitutes. It can lead to a positive pro-competitive effect if the two providers decide to compete in quantities instead of colluding. It can induce a positive efficiency effect if the foreign providers are more efficient than the domestic provider. Finally, it can lead to a negative profit-shifting effect if the foreign providers shift their profits abroad. The fact that the welfare effects have different signs corresponds to policy and academic concerns that the welfare impact of service trade liberalization is ambiguous and depends on the adopted market structure and country characteristics. In the second part of the paper, we have introduced our framework into a CGE model for Tunisia to quantify the welfare impact of allowing one foreign provider to enter Tunisia's telecommunication sector. According to our conservative estimates, the welfare implications are clearly positive if competition can be guaranteed between providers. Welfare gains can be up to 0.65% if the foreign provider is 15% more efficient than the domestic incumbent and does not shift its profits abroad. This can be considered a significant gain in household welfare, since we are modelling the liberalization of a single sector in a static context. In contrast, telecom liberalization will be welfare deteriorating if the foreign provider colludes with the domestic incumbent and shifts a significant portion of its profits abroad. Our results thus call for Tunisia among other developing countries to step up its pro-competitive regulatory reforms while liberalizing its telecom sector. By deriving the Lerner markup conditions for one imperfectly services sector, our framework has set a first step to analyze the role of market structure on the success of service trade liberalization. These Lerner markup conditions do not easily generalize, however, to a framework with multiple imperfectly competitive services sectors. Our approach thus cannot be used to analyze the welfare impact of multi-sector service trade liberalization. For multi-sector service trade liberalization, the approach suggested by Konan and Maskus (2006) continues to be the preferred approach. Future research is needed to derive the Lerner markup conditions in a framework with multiple imperfectly competitive services sectors. Finally, with more information concerning fixed costs and licensing fees in a country's service sector, we would be able to do a richer analysis of the role of market structure in the success of a service trade liberalization in a single sector. Specifically, we would be able to compare the welfare impact of partial service trade liberalization where only few players are allowed to enter a market to complete service trade liberalization where the service sector becomes monopolistically competitive. We leave this for future work.