Assessment of tariff equivalents for services considering the zero flows

Measuring trade barriers in services is complex due to all the non-tariff barriers that exist. In this paper we rely on quantity measures using gravity equation. In order to take into consideration the presence of zero flows in the database, we use a sample selection model. Then, we use the results of both stages of the model to derive tariff equivalents based on the distribution of the estimated residuals. Applying this methodology to the Eurostat database, we obtain tariff equivalents for a large number of countries and for 11 services sectors. Our main conclusions are that protection is not homogeneous among sectors for a country and that services openness is not directly linked with the level of development. Our results are robust to changes in specification, but we do find that OLS estimations overestimate the commercial openness of the countries with many zero flows.