requirements, is particularly important for countries with perceptions of relatively lower levels of investor protection and low private credit, as greater ownership would allow foreign firms to better control and protect their assets and technologies.

Wagle (2011) analyzes the 2010 World Bank Foreign Direct Investment Regulations’ indicators for 87 economies. The study finds that fewer pre‐ and post‐incorporation procedural steps required to establish wholly foreign‐owned, domestically‐incorporated companies and fewer restrictions to the FDI arbitration process coupled with improved judicial assistance, are associated with higher FDI stocks. Interestingly, in this study, restrictions on equity ownership across sectors are not a significant determinant of FDI, and the author suggests that de facto implementation of laws matters more to investors.

Arnold and others (2012) find that the liberalization of India’s services sectors in the 1990s significantly contributed to the productivity increase of foreign and domestic manufacturing firms. The authors construct a Services Policy Reform Index to assess the extent of allowed private (including foreign) ownership as well as operational freedom of service providers in the banking, telecommunications, insurance and transport sectors. Using panel data for about 4,000 Indian firms from 1993 to 2005, they find that a one standard deviation increase in the aggregate index of services liberalization resulted in a productivity increase of 11.7 percent for domestic firms and 13.2 percent for foreign enterprises.

# _b. Services Trade Restrictiveness Database_

The World Bank’s Services Trade Restrictions Database covers 103 countries and five major services sectors (financial, telecommunications, retail, transportation, and professional). It offers several stylized facts about global trade policy patterns in services, including:

- Numerous second‐generation restrictions are in place on entry, ownership, and operations, even though public monopolies are now rare and few services markets are completely closed.

- A high degree of _de jure_ openness does not always imply _de facto_ openness, and market access is often unpredictable. Regulatory discretion is accentuated by a lack of accountability in providing reasons for rejecting a license application, or by the fact that foreign providers do not have the right to appeal regulatory decisions.

- Though certain regions are more restrictive than others, the relative openness across sectors tends to be similar across regions. In particular, professional services and (to a certain extent) transportation remain bastions of protectionism in high‐income and developing countries alike, whereas retail, telecommunications, and even finance tend to be relatively open.

Using this database, Borchert, Gootiiz, and Mattoo (2012) match FDI flow data with information on services policy restrictions for 93 destination countries and multiple sectors. They find that restrictions on foreign acquisitions, discrimination in licensing, restrictions on the repatriation of earnings, and inadequate legal resources to appeal decisions significantly deter investment. They also observe that the average value of merger and acquisition inflows is about $2.2 billion less in countries with high Services Trade Restrictiveness scores than in countries with open policy regimes.

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