The Korean Economic Review
Regulation and Service Exports: Theoretical and Empirical Analyses
Gil Seong Kang (Ministry of Strategy and Finance), Yongkul Won (University of Seoul)Year 2016Vol. 32No. 2
This paper constructs a theoretical framework to analyze the impacts of deregulation onservice exports using the monopolistic competition model developed by Krugman (1980).The framework entails two core claims. First, the positive effects of deregulation on serviceexports are more prominent in the differentiated or knowledge-intensive service sectors suchas insurance, business, and cultural and recreation sectors than those in the standardized onessuch as travel and communication sectors. Secondly, the trade-stimulating impacts ofderegulation in exporting country are of larger magnitude than those of deregulation inimporting country. We then empirically test and prove these arguments using the Hausman-Taylor estimation method and the World Bank’s STRI dataset. From these results, somepolicy implications are drawn for service industry development.