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Institute for International Integration Studies IIIS Discussion Paper - page 21 / 41

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i j t i j 1 i t 2 j t 3 i t 4 j t 5 i j 6 i j 7 i j l n M = + l n G D P p c + l n G D P p c + l n P o p + l n P o p + l n D i s t a n c e + A d j a c e n c y + L a n g u a g e α β β β β β β β

8 i j 9 i 1 0 j 1 0 i t i + E U + l n T e m p + l n T e m p + l n N T B T o t a l + + j (7) t β β β β θ ε

In the case of transport services, rather than using a measure of the total barriers to

s e r v i c e s t r a d e , a m e a s u r e o f N T B s s p e c i f i c t o t h e t r a n s p o r t s e c t o r ( β 9 l n N T B T S P j ) i added to equation (1) to give (8). This variable is not found to be statistically significant (table 5, second panel). s 25

i j t i j 1 i t 2 j t 3 i t 4 j t 5 i j 6 i j 7 i j 8 i j 9 j t i j t l n M = + l n G D P p c + l n G D P p c + l n P o p + l n P o p + l n D i s t a n c e + A d j a c e n c y + L a n g u a g e + E U + l n N T B T S P + + α β β β β β β β β β θ ε

(8)

No specific variable measuring barriers to the import of government services is provided by the Australian Productivity Commission, therefore the total services NTB variable is included in the model to give (9). As with transport and travel services, the NTB variable is again not found to be statistically significant.

i j t i j 1 i t 2 j t 3 i t 4 j t 5 i j 6 i j 7 i j 8 i j 1 0 j t i j t l n M = + l n G D P p c + l n G D P p c + l n P o p + l n P o p + l n D i s t a n c e + A d j a c e n c y + L a n g u a g e + E U + l n N T B T o t a l + + α β β β β β β β β β θ ε

(9)

S i m i l a r l y , a v a r i a b l e m e a s u r i n g b a r r i e r s t o t r a d e i n c o m m e r c i a l s e r v i c e s ( β 1 1 l n N T B C o m m is added to equation (5) to give (10). Once again, the results show that the variable does not significantly influence trade flows (table 7, third panel). j )

i j t i j 1 i t 2 j t 3 i t 4 j t 5 i j 6 i j 7 i j 8 i j l n M = + l n G D P p c + l n G D P p c + l n P o p + l n P o p + l n D i s t a n c e + A d j a c e n c y + L a n g u a g e + E U α β β β β β β β β

9 i 1 0 j 1 1 j t i j t + l n E c o F r e e + l n E c o F r e e + N T B C o m m + (10) + β β β θ ε

The results from the inclusion of the NTB variable are not satisfactory. Only in the case of total services is this variable found to significantly influence trade flows (at the 15 per cent level) and even this result is not particularly robust to changes in the specification of the gravity equation.

Earlier research by Grunfeld and Moxnes (2003) employed the same OECD services trade database and a similar NTB variable (also based on the same TRI). The NTB variable is found to be significant at the 1 per cent level in most of their models. They use pooled OLS with exporting country fixed effects (the authors do not state how they specify their fixed effects model). Applying this approach to the dataset used in this paper, similar results to Grunfeld and Moxnes (2003) are found, with the NTB variable

25 Replacing the transport specific NTB variable with the total services NTB measure used in earlier equations does not change the results for transport services.

19

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