Putting Services and Foreign Direct Investment with Endogenous Productivity Effects in Computable General Equilibrium Models

With the growing importance of services and foreign direct investment in services, it is important to have a framework to analyze the impact of the liberalization of barriers to foreign direct investment in services. This paper summarizes several recent papers and builds policy-based computable general equilibrium models showing the dynamics of services, foreign direct investment and the endogenous productivity effect from services. The modeling framework shows that the liberalization of barriers against foreign direct investment in services yields welfare gains several times larger than the usual estimates from traditional computable general equilibrium models, which focus on goods trade, not foreign direct investment in services. The larger estimates are consistent with econometric evidence on the gains from services liberalization. The paper begins with a small stylized model to help understand the fundamental economics. Then it describes models developed at the request of the Russian government to assess the potential impact of Russia's accession to the WTO. Reviews of the work indicated that the modeling helped the Russian government gain public support for the WTO entry. The paper also describes a new technique that allows modelers to include tens of thousands of households in the model.

Bibliographic Details

Main Author:	Tarr, David G.
Language:	English en_US
Published:	World Bank, Washington, DC 2012-03
Subjects:	ACCESS TO SERVICES, ACCOUNTANT, ACCOUNTING, ADVANCED COUNTRIES, AGGREGATE SUPPLY, AGRICULTURE, AVERAGE COSTS, BALANCE OF TRADE, BARRIER, BARRIERS TO INVESTMENT, BASE YEAR, BASKET OF GOODS, BENCHMARK, BIDS, BINDING CONSTRAINT, BUSINESS SERVICE, BUSINESS SERVICES, BUYERS, CAPITAL FLOWS, CAPITAL STOCK, CAPITAL STOCKS, CLOSED ECONOMIES, COMPARATIVE ADVANTAGE, COMPETITIVE MODELS, COMPETITIVENESS, COMPOSITE SERVICES, CONSTANT RETURNS TO SCALE, CONSUMERS, COST FUNCTIONS, COST REDUCTION, COST STRUCTURE, COST STRUCTURES, COUNTRY OF ORIGIN, CUSTOMS, DELIVERY OF SERVICES, DELIVERY SERVICES, DEMAND CURVE, DEMAND FUNCTION, DEMAND FUNCTIONS, DERIVATIVE, DERIVATIVES, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT FINANCE, DEVELOPMENT POLICY, DOMESTIC ECONOMY, DOMESTIC MARKET, DOMESTIC PRICE, DOMESTIC PRICES, DUMPING, ECONOMIC ACTIVITY, ECONOMIC GEOGRAPHY, ECONOMIC PERFORMANCE, ECONOMICS LITERATURE, ELASTICITY, ELASTICITY OF SUBSTITUTION, ELASTICITY OF SUPPLY, ELECTRICITY, EQUILIBRIUM, EQUILIBRIUM VALUES, EQUIPMENT, EXCHANGE RATE, EXPENDITURES, EXPORT COMPETITIVENESS, EXPORT MARKET, EXPORT MARKETS, EXPORTERS, EXTERNALITIES, EXTERNALITY, FACTORS OF PRODUCTION, FINANCIAL SECTOR, FINANCIAL SERVICES, FINANCIAL SUPPORT, FIRM PERFORMANCE, FIXED COST, FIXED COSTS, FIXED PRICES, FIXED RATE, FOREIGN BANKS, FOREIGN COMPETITION, FOREIGN DIRECT INVESTMENT, FOREIGN DIRECT INVESTORS, FOREIGN FIRM, FOREIGN FIRMS, FOREIGN INPUT, FOREIGN INPUTS, FOREIGN INVESTORS, FOREIGN TRADE, GDP, GEOGRAPHIC SCOPE, GLOBAL DEVELOPMENT FINANCE, GOOD GOVERNANCE, GROWTH RATE, GROWTH RATES, GROWTH THEORY, HOME COUNTRY, HOMOGENEOUS GOOD, HORIZONTAL RESTRICTIONS, IMPERFECT COMPETITION, INCREASING RETURNS, INCREASING RETURNS TO SCALE, INDIVIDUAL FIRM, INDIVIDUAL FIRMS, INDUSTRIAL COUNTRIES, INSURANCE, INSURANCE COMPANIES, INSURANCE MARKETS, INTERMEDIATE GOODS, INTERMEDIATE PRODUCTS, INTERNATIONAL BANK, INTERNATIONAL DEVELOPMENT, INTERNATIONAL ECONOMICS, INTERNATIONAL TRADE, INVESTMENT FLOWS, JOINT VENTURE, MANUFACTURING, MARGINAL COST, MARGINAL COSTS, MARGINAL PRODUCT, MARGINAL PRODUCTIVITY, MARGINAL REVENUE, MARKET ACCESS, MARKET POWER, MARKET PRICES, MARKET REFORMS, MARKET SHARE, MARKET SIZE, MARKETING, MOBILE TELEPHONE, MONETARY FUND, MONOPOLISTIC COMPETITION, MONOPOLY, NATIONAL INCOME, NET EXPORTS, OPEN ACCESS, OPEN ECONOMIES, OPEN ECONOMY, OUTPUT, POST OFFICE, PRICE INDEX, PRODUCT DIFFERENTIATION, PRODUCTION FUNCTION, PRODUCTION PROCESS, PRODUCTION STRUCTURE, PRODUCTION STRUCTURES, PRODUCTIVITY, PRODUCTIVITY GROWTH, PRODUCTIVITY INCREASES, PURCHASING, QUOTA RENTS, R&D, RATE OF RETURN, RATE OF RETURN ON CAPITAL, REAL EXCHANGE RATE, RED TAPE, REDUCTION OF COST, REGIONAL TRADE, REGULATORY BARRIERS, REGULATORY ENVIRONMENT, RESULT, RESULTS, RETAIL, RETAIL TRADE, SALES, SECURITIES, SENSITIVITY ANALYSIS, SERVICE PROVIDERS, SHARE OF CAPITAL, SKILLED WORKERS, SMALL COUNTRIES, SMALL COUNTRY, SPREAD, SUBSTITUTE, SUBSTITUTES, SUBSTITUTION EFFECT, SUPPLIERS, SUPPLY CURVES, TARIFF BARRIERS, TARIFF REVENUE, TAX, TAX RATE, TAX REVENUES, TECHNICAL EXPERTISE, TECHNOLOGICAL CHANGE, TELECOMMUNICATION, TELECOMMUNICATIONS, TELECOMMUNICATIONS PROVIDERS, TELEPHONE, TELEPHONE SERVICE, TELEPHONE SERVICES, TIME FRAME, TOTAL COSTS, TOTAL FACTOR PRODUCTIVITY, TRADE BALANCE, TRADE LIBERALIZATION, TRADE NEGOTIATIONS, TRADE POLICY, TRADE REGIME, TRADING, TRANSITION COUNTRIES, USERS, USES, UTILITY FUNCTION, VALUE ADDED, VARIABLE COST, VARIABLE COSTS, WORLD MARKET, WORLD TRADE, WORLD TRADE ORGANIZATION, WTO,
Online Access:	http://documents.worldbank.org/curated/en/2012/03/15974846/putting-services-foreign-direct-investment-endogenous-productivity-effects-computable-general-equilibrium-models https://hdl.handle.net/10986/19869
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