Working Paper: CEPR ID: DP5382
Authors: Marion Jansen; Roberta Piermartini
Abstract: This paper gives insights into the possible trade creating effects of service trade liberalization via Mode 4. In particular we expect that temporary movements of persons, like permanent movements, have the potential to reduce transaction costs for merchandise trade between home and host country. Exploiting data on H-1B beneficiaries from different origins in the United States and using a gravity model of trade, we find significantly positive effects of temporary movements of persons on bilateral merchandise trade. In addition to this, the paper provides insights into the determinants of temporary movements of persons.
Keywords: bilateral trade flows; mode 4; services liberalization; WTO
JEL Codes: C30; F13; F15; F29
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| mode 4 movements (F20) | reduced transaction costs (D23) |
| mode 4 movements (F20) | enhanced preferences for home country goods (F14) |
| higher-skilled migrants (F22) | stronger trade promoting effects (F19) |
| mode 4 movements (F20) | imports from beneficiaries' home countries (F24) |
| mode 4 movements (F20) | exports to beneficiaries' home countries (F35) |
| mode 4 movements (F20) | bilateral trade flows (F10) |
| mode 4 movements (F20) | bilateral merchandise trade (F10) |