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WTO Working Papers

WTO working papers usually represent research in progress. Such research may be conducted in the preparation of WTO Secretariat reports, studies or other material for WTO members. The papers are circulated for comment because the WTO considers critical review of professional research to be extremely important.

English

The Impact of Mode 4 Liberalization on Bilateral Trade Flows

This paper gives insights into the possible trade creating effects of service trade liberalization via Mode 4. In particular we expect that temporary movements of persons, like permanent movements, have the potential to reduce transaction costs for merchandise trade between home and host country. Exploiting data on H-1B beneficiaries from different origins in the United States and using a gravity model of trade, we find significantly positive effects of temporary movements of persons on bilateral merchandise trade. In addition to this, the paper provides insights into the determinants of temporary movements of persons.

English

Keywords: Mode 4, bilateral trade flows, WTO, services liberalization
JEL: F29: International Economics / International Factor Movements and International Business / International Factor Movements: Other; F13: International Economics / Trade / Trade Policy; International Trade Organizations; F15: International Economics / Trade / Economic Integration; C30: Mathematical and Quantitative Methods / Multiple or Simultaneous Equation Models; Multiple Variables / Multiple or Simultaneous Equation Models; Multiple Variables: General
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