- Ingo Borchert, Economist, DECTI, World Bank
- Aaditya Mattoo, Research Manager, DECTI, World Bank
(joint with joint with Batshur Gootiiz and Arti Grover)
Abstract: A new cross-country database on services policy reveals a perverse pattern: many landlocked countries restrict trade in the very services that connect them with the rest of the world. On average, telecommunications and air-transport policies are nearly twice as restrictive in landlocked countries as elsewhere. The phenomenon is most starkly visible in Sub-Saharan Africa and is associated with lower levels of political accountability. Across 102 countries, we find evidence that these policies lead to more concentrated market structures and more limited access to services than these countries would otherwise have, even after taking into account the influence of geography and incomes, and the possibility that policy is endogenous. Policies in other countries, industrial and developing alike, also limit competition in international transport services. Hence, “trade-facilitating” investments under various “aid-for-trade” initiatives are likely to earn a low return unless they are accompanied by meaningful reform in these services sectors.