The Impact of Ethiopian Trade in Service Liberalization on Welfare: CGE Analysis

Belete, Teressa

The Impact of Ethiopian Trade in Service Liberalization on Welfare: CGE Analysis

Files

Teressa Belete.pdf (15.17 MB)

Date

2009-06

Authors

Belete, Teressa

Publisher

A.A.U

Abstract

The contribution of Service sector to the development of both developed and developing economies is increasing from time to time. However, many developing countries, including that of Ethiopia, are blamed for delivering high-cost and nnproductive input services, thereby limiting economic efficiency gains from trade reforms. This, calls for liberalization of the sector so that it improves welfare and enhance economic growth. Ethiopia has also requested to access World Trade Organization in 2003 and the country is still underway to access the institution. Thus, this study has focused on the impact of the service sector liberalization on welfare of the country. To meet its objective the study has undertaken qualitative assessment and quantitative assessments. The qualitative assessment compares the Ethiopian service sector policy to GATS principles and concludes that the liberalization will have positive impact on sectors like construction and transport service sub-sector which are relatively strong enough to compete with competitors. The quantitative assessment has tried to quantify the net welfare impact of the liberalization with different scenarios at macro level using CGE model. The result of the simulations shows that the country derives higher welfare gain from liberalizing its service sector. Moreover, the comparison of service sector liberalization and goods trade liberalization shows that there is higher welfare gain in case of goods trade liberalization than service trade liberalization due to the relatively low protection in service sector than goods sector. Finally, simultaneous liberalization of the service and goods trade also shows higher welfare gain even though the welfare is less than the additive welfare of the separate liberalization of the tow sectors.