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The Impact of Liberalizing Barriers to Foreign Direct Investment in Services: The Case of Russian Accession to the World Trade Organization
Author(s) -
Jensen Jesper,
Rutherford Thomas,
Tarr David
Publication year - 2007
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/j.1467-9361.2007.00362.x
Subject(s) - multinational corporation , accession , foreign direct investment , trade in services , liberalization , computable general equilibrium , tariff , investment (military) , international economics , market access , business , economics , goods and services , international trade , productivity , service (business) , trade barrier , market economy , economy , european union , economic growth , microeconomics , finance , agriculture , ecology , politics , biology , political science , law , macroeconomics
In this paper a computable general equilibrium model of the Russian economy is used to assess the impact of accession to the World Trade Organization (WTO), which encompasses improved market access, Russian tariff reduction, and reduction of barriers against multinational service providers. It is assumed that foreign direct investment in business services is necessary for multinationals to compete well with Russian business services providers, but cross‐border service provision is also present. The model incorporates productivity effects in both goods and services markets endogenously, through a Dixit–Stiglitz framework. It is estimated that Russia will gain about 7.2% of the value of Russian consumption in the medium term from WTO accession and up to 24% in the long run. It is also estimated that the largest gains to Russia will derive from liberalization of barriers against multinational service providers. Piecemeal and systematic sensitivity analysis shows that the results are robust.