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GTAP Resource #4755

"DR-CAFTA Agreement and liberalization of trade in services: Evidence from Costa Rica"
by Traore, Fousseini, Carmen Estrades and Calvin Djiofack Zebaze

Context and objective
In January 2009 and after the first referendum approval in the country, Costa Rica entered the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA), which was preceded by complex negotiation, ratification and implementation processes. Besides liberalization of trade in goods (eliminating tariffs and reducing non-tariff barriers between member countries), the DR-CAFTA agreement also includes important provisions reducing restrictions and enhancing transparency on trade in services.
The aim of this study is to assess the effects of the liberalization of trade in services in the framework of the DR-CAFTA agreement on Costa Rica, focusing on growth, employment and welfare indicators. The analysis put a particular emphasis on the telecommunications and insurance, two sectors that experienced the most substantial transformation with the end of the government monopolies.

Similarly to trade in goods, the liberalization of trade in services can affect households, either directly through prices or employments, or indirectly via economic growth (Dollar and Kraay, 2001). While the direct effect is not very intuitive since telecommunication is traditionally capital intensive with limited direct impact on employment, it seems however, potentially important due to the recent transformations which set the telecommunications as a mass consumption product. The indirect effect is more obvious because of the crucial role that telecommunications and financial services play in the competitiveness and productivity of the economy (as a whole), as an important input in production activities and as an exchange facilitators (Konan et al, 2002; Verikios et al, 2002; Hertel et al. 1999; Jensen, Rutherford and Tarr, 2007; Whalley, 2004; Rutherford and Tarr, 2012 ).

Our empirical analysis relies on two complementary approaches: i) First, a simple micro incidence analysis based on labor force surveys and expenditure surveys to assess...

Resource Details (Export Citation) GTAP Keywords
Category: 2015 Conference Paper
Status: Published
By/In: Presented at the 18th Annual Conference on Global Economic Analysis, Melbourne, Australia
Date: 2015
Created: Traore, F. (4/15/2015)
Updated: Traore, F. (6/17/2015)
Visits: 2,598
- Economic analysis of poverty
- Economic development
- Foreign direct investment
- Trade in services

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