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The determinants of service imports: The role of cost pressure and financial constraints

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  • Biewen, Elena
  • Harsch, Daniela
  • Spies, Julia

Abstract

This study provides evidence on how German multinational firms have restructured their service activities around the recent crisis. Making use of new micro-level data on service imports of German multinationals from 2002-2008, we assess the determinants of service offshoring along the extensive and intensive margins. In particular, we evaluate how internal frictions in terms of a sharp drop in the sales level (per employee) and external frictions in terms of a reduced availability of credit co-determine the likelihood and the extent of sourcing services from abroad. First, we find that firms are less likely to start to import services from abroad if they are under cost pressure. By contrast, firms intensify existing service imports linkages in times of a sales drop. Second, financial constraints, which played a major role for the goods trade during the crisis, did not have any significant effect on service imports. These results are in line with the argument that the generally observed crisis-resilience of service trade stems from increased pressures to save on variable costs through offshoring and from its lower dependence on external finance. Furthermore, and in line with our argument, we find that a decline in sales and labor productivity induces firms to sort into intra-firm rather than arm's-length trading. --

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Papers with number 31/2012.

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Date of creation: 2012
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Handle: RePEc:zbw:bubdps:312012

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Keywords: Service Imports; Intra-Firm Trade; Arm's-Length Trade;

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  1. Breinlich, Holger & Criscuolo, Chiara, 2010. "International Trade in Services: A Portrait of Importers and Exporters," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7837, C.E.P.R. Discussion Papers.
  2. Ingo Borchert & Aaditya Mattoo, 2009. "The crisis-resilience of services trade," The Service Industries Journal, Taylor & Francis Journals, Taylor & Francis Journals, vol. 30(13), pages 2115-2136, August.
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  6. Ines Buono & Harald Fadinger & Stefan Berger, 2008. "The Micro Dynamic of Exporting-Evidence from French Firms," Vienna Economics Papers, University of Vienna, Department of Economics 0901, University of Vienna, Department of Economics.
  7. Amiti, Mary & Weinstein, David E., 2009. "Exports and Financial Shocks," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7590, C.E.P.R. Discussion Papers.
  8. Yama Temouri & Alexander Vogel & Joachim Wagner, 2010. "Self-selection into export markets by business services firms – Evidence from France, Germany and the United Kingdom," Working Paper Series in Economics, University of Lüneburg, Institute of Economics 183, University of Lüneburg, Institute of Economics.
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  10. Robert C. Feenstra & Zhiyuan Li & Miaojie Yu, 2011. "Exports and Credit Constraints Under Incomplete Information: Theory and Evidence from China," NBER Working Papers 16940, National Bureau of Economic Research, Inc.
  11. Sebastian Hügelschäffer & Daniel Kromer & Alexander Lipponer, 2009. "Die deutsche Statistik über Direktinvestitionen: Neuerungen und wissenschaftliche Nutzung," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer, Springer, vol. 3(3), pages 157-167, November.
  12. Markus Kelle & Jörn Kleinert, 2010. "German Firms in Service Trade," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, Duncker & Humblot, Berlin, vol. 56(1), pages 51-72.
  13. Vogel, Alexander & Wagner, Joachim, 2008. "Higher Productivity in Importing German Manufacturing Firms: Self-Selection, Learning from Importing, or Both?," IZA Discussion Papers 3854, Institute for the Study of Labor (IZA).
  14. Stefano Federico & Enrico Tosti, 2012. "Exporters and importers of services: firm-level evidence on Italy," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 877, Bank of Italy, Economic Research and International Relations Area.
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