Trade imbalance in international message telephone services

An econometric model is estimated to identify determinants of trade imbalan ce in international message telephone services markets. Results indicate th at asymmetric market structure is important in explaining bilateral market imbalances for high income country pairs. For low and high income country p airs, GDP per capita is the dominant cause of traffic imbalances. The findi ngs suggest that telecommunications liberalization policies are effective i n reducing distortions in international traffic flows and settlement paymen ts. However, liberalization should be accompanied by developmental programm es that enhance income per capita and telecommunications network investment in developing countries. Such programmes may be effective in providing a m ore equitable distribution of the gains from telecommunications reform acro ss countries.