Working Paper: CEPR ID: DP2669
Authors: Joseph Francois; Ian Wooton
Abstract: In this Paper we examine the interaction between the different modes of market access commitments in services (cross-border and establishment) market structure, and regulation. In this context, we focus on the impact of improved domestic market access for a foreign service provider on a domestic service market. We work with a model where the domestic industry is assumed to be imperfectly competitive and, as a result of domestic regulation, is able to act as a cartel. We also examine the incentives for the domestic firms to accommodate the entry of the foreign firm by inviting it to join the cartel.
Keywords: Imperfect competition; Market access; Services trade; Trade liberalization
JEL Codes: F12; F13; F23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Improved domestic market access for foreign service providers (L89) | Significant changes in the domestic service market (J29) |
| Entry of a foreign firm (F23) | Enhanced competition/Profit shifting (F23) |
| Foreign firm competing independently (F23) | Pro-competitive outcomes (L49) |
| Foreign firm co-opted into domestic cartel (L12) | Negative implications for consumer welfare and market dynamics (F61) |
| Decreased trade barriers (F19) | Foreign firm integrates into domestic cartel/Foreign firm competes independently (F23) |
| Foreign firm integrates into domestic cartel (L22) | Reduced competition and higher prices for consumers (D49) |