We examine interaction between trade in goods and market power in domestic trade and distribution, developing a model that highlights this interaction. Theory points to an expected linkage between service sector competition and goods trade, one supported by econometrics involving import patterns of 21 OECD countries vis-à-vis 86 trading partners. This points to significant linkages between effective market access conditions for goods and the structure of the service sector. Because of the implied interaction, ignoring the structure of the domestic service sector may lead to a substantial underestimation of the direct impact of tariffs on trade flows.

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Tinbergen Institute Discussion Paper Series
Tinbergen Institute

François, J.F, & Wooton, I. (2004). Market Structure in Services and Market Access in Goods (No. TI 04-050/2). Tinbergen Institute Discussion Paper Series. Retrieved from http://hdl.handle.net/1765/6647