Exports and Profitability -First Evidence for German Business Services Enterprises

Research output: Contributions to collected editions/worksChapterpeer-review

Authors

We use the unique recently released German business services statistics panel to conduct the first comprehensive empirical study on the relationship between exports and profitability for the business services sector. We document a negative profitability differential of services exporters compared to non-exporters that is statistically significant, though rather small, when observed firm characteristics and unobserved firm specific effects are controlled for. We find that export-starters in services are less profitable than non-starters, even two years before they begin to export, pointing to self-selection of less profitable firms into export markets. We use a recently developed continuous treatment approach to investigate the causal impact of exports on profits. The estimated dose-response function shows an s-shaped relationship between profitability in 2005 and firms’ export-sales ratio in 2004. Enterprises with a very small share of exports in total sales have a lower rate of profit than non-exporting firms. Then, with an increase in export intensity the rate of profit increases, too. However, even at the maximum the average profitability of the exporters is not, or only slightly, higher than the average rate of profit of the non-exporting firms. Given that Germany is one of the leading actors in the world market for services, the evidence provided here is interesting on its own. Furthermore, it can serve as a benchmark for future studies using comparable data for firms from services industries in other countries.

Original languageEnglish
Title of host publicationMicroeconometrics of International Trade
EditorsJoachim Wagner
Number of pages32
PublisherWorld Scientific Publishing Co.
Publication date01.01.2016
Pages279-310
ISBN (print)9789813109681
ISBN (electronic)9789813109698
DOIs
Publication statusPublished - 01.01.2016

Bibliographical note

Publisher Copyright:
© 2016 by World Scientific Publishing Co. Pte. Ltd.

    Research areas

  • business services enterprises, Exports, Germany, profitability
  • Economics