TY - CHAP

T1 - Exports and Profitability -First Evidence for German Business Services Enterprises

AU - Vogel, Alexander

AU - Wagner, Joachim

N1 - Publisher Copyright: © 2016 by World Scientific Publishing Co. Pte. Ltd.

PY - 2016/1/1

Y1 - 2016/1/1

N2 - 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.

AB - 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.

KW - business services enterprises

KW - Exports

KW - Germany

KW - profitability

KW - Economics

UR - http://www.scopus.com/inward/record.url?scp=85135642657&partnerID=8YFLogxK

UR - https://www.mendeley.com/catalogue/3739f954-2058-32cf-adbf-7e754c04f566/

U2 - 10.1142/9789813109698_0008

DO - 10.1142/9789813109698_0008

M3 - Chapter

AN - SCOPUS:85135642657

SN - 9789813109681

T3 - World Scientific Studies in International Economics

SP - 279

EP - 310

BT - Microeconometrics of International Trade

A2 - Wagner, Joachim

PB - World Scientific Publishing Co.

ER -