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Exports and Profitability – First Evidence for German Business Services Enterprises

Author

Listed:
  • Alexander Vogel

    () (Institute of Economics, University of Lüneburg)

  • Joachim Wagner

    () (Institute of Economics, University of Lüneburg)

Abstract

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 on 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.

Suggested Citation

  • Alexander Vogel & Joachim Wagner, 2009. "Exports and Profitability – First Evidence for German Business Services Enterprises," Working Paper Series in Economics 129, University of Lüneburg, Institute of Economics.
  • Handle: RePEc:lue:wpaper:129
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    References listed on IDEAS

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    2. Thorsten Schank & Claus Schnabel & Joachim Wagner, 2016. "Do Exporters Really Pay Higher Wages? First Evidence from German Linked Employer–Employee Data," World Scientific Book Chapters,in: Microeconometrics of International Trade, chapter 5, pages 177-213 World Scientific Publishing Co. Pte. Ltd..
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    7. repec:spo:wpecon:info:hdl:2441/10147 is not listed on IDEAS
    8. Joachim Wagner, 2003. "Unobserved firm heterogeneity and the size-exports nexus: Evidence from German panel data," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 139(1), pages 161-172, March.
    9. Michela Bia & Alessandra Mattei, 2008. "A Stata package for the estimation of the dose–response function through adjustment for the generalized propensity score," Stata Journal, StataCorp LP, vol. 8(3), pages 354-373, September.
    10. repec:spr:manint:v:47:y:2007:i:3:d:10.1007_s11575-007-0019-z is not listed on IDEAS
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    Cited by:

    1. Helmut Fryges & Alexander Vogel & Joachim Wagner, 2015. "The Impact of R&D Activities on Exports of German Business Services Enterprises: First Evidence from a Continuous Treatment Approach," The World Economy, Wiley Blackwell, vol. 38(4), pages 716-729, April.
    2. Dhyne, Emmanuel & Demian, Calin-Vlad & Harasztosi, Péter & Meriküll, Jaanika & Lalinsky, Tibor & Cazacu, Ana-Maria & Bugamelli, Matteo & Soares, Ana Cristina & Berthou, Antoine & Oropallo, Filippo, 2015. "Assessing European firms' exports and productivity distributions: the CompNet trade module," Working Paper Series 1788, European Central Bank.
    3. Joachim Wagner, 2012. "Exports, Imports and Profitability: First Evidence for Manufacturing Enterprises," Open Economies Review, Springer, vol. 23(5), pages 747-765, November.
    4. Joseph Francois & Bernard Hoekman, 2010. "Services Trade and Policy," Journal of Economic Literature, American Economic Association, vol. 48(3), pages 642-692, September.
    5. Cenk Gokce ADAS, 2016. "Exporting Firms, Productivity And Profitabiliy: A Survey Of The Evidence From Manufacturing Industries," Proceedings of International Academic Conferences 3606362, International Institute of Social and Economic Sciences.
    6. Markus Kelle & Jörn Kleinert, 2010. "German Firms in Service Trade," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 56(1), pages 51-72.
    7. Temouri, Yama & Vogel, Alexander & Wagner, Joachim, 2013. "Self-selection into export markets by business services firms – Evidence from France, Germany and the United Kingdom," Structural Change and Economic Dynamics, Elsevier, vol. 25(C), pages 146-158.
    8. Asier Minondo, 2014. "The Relationship Between Export Status And Productivity In Services: A Firm-Level Analysis For Spain," Bulletin of Economic Research, Wiley Blackwell, vol. 66(S1), pages 138-146, December.
    9. repec:krk:eberjl:v:2:y:2014:i:4:p:9-29 is not listed on IDEAS
    10. Bergman, Karin & Ejermo, Olof, 2011. "Swedish Business R&D and its Export Dependence," Working Papers 2011:26, Lund University, Department of Economics.
    11. Alexander Vogel & Joachim Wagner, 2012. "Innovation and Exports of German Business Services Enterprises: First evidence from a new type of firm data," Working Paper Series in Economics 246, University of Lüneburg, Institute of Economics.
    12. Braakmann Nils & Wagner Joachim, 2011. "Product Diversification and Profitability in German Manufacturing Firms," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 231(3), pages 326-335, June.
    13. Joachim Wagner, 2012. "International trade and firm performance: a survey of empirical studies since 2006," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(2), pages 235-267, June.
    14. Joachim Wagner, 2011. "From Estimation Results to Stylized Facts Twelve Recommendations for Empirical Research in International Activities of Heterogeneous Firms," De Economist, Springer, vol. 159(4), pages 389-412, December.
    15. Joachim Wagner, 2015. "Kombinierte Firmenpaneldaten – Datenangebot und Analysepotenziale," Working Paper Series in Economics 340, University of Lüneburg, Institute of Economics.
    16. Marco Grazzi, 2012. "Export and Firm Performance: Evidence on Productivity and Profitability of Italian Companies," Journal of Industry, Competition and Trade, Springer, vol. 12(4), pages 413-444, December.
    17. Alexander Vogel, 2009. "The German Business Services Statistics Panel 2003 to 2007," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 129(3), pages 515-522.
    18. C Sharma, 2016. "Does importing more inputs raise productivity and exports? Some evidence from Indian manufacturing," Economic Issues Journal Articles, Economic Issues, vol. 21(1), pages 1-23, March.
    19. Diana Alexandra Gonçalves Costa & Ana Teresa Cunha de Pinho Tavares Lehmann, 2015. "Performance Differences between Exporters and Non-Exporters: the Case of Portugal," FEP Working Papers 569, Universidade do Porto, Faculdade de Economia do Porto.
    20. Joachim Wagner, 2015. "25 Jahre Nutzung vertraulicher Firmenpaneldaten der amtlichen Statistik für wirtschaftswissenschaftliche Forschung: Produkte, Projekte, Probleme, Perspektiven," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer;Deutsche Statistische Gesellschaft - German Statistical Society, vol. 9(2), pages 83-106, November.
    21. Fulvio Castellacci, 2014. "Service Firms Heterogeneity, International Collaborations and Export Participation," Journal of Industry, Competition and Trade, Springer, vol. 14(2), pages 259-285, June.
    22. Olof Ejermo & Karin Bergman, 2014. "Services vs. Manufacturing – How Does Foreign and Domestic Sales Impact on Their R&D?," Journal of Industry, Competition and Trade, Springer, vol. 14(3), pages 367-391, September.
    23. Alexander Vogel, 2009. "Exportprämien unternehmensnaher Dienstleister in Niedersachsen," Working Paper Series in Economics 140, University of Lüneburg, Institute of Economics.
    24. Asier Minondo, 2011. "Exporters of services in Spain," Working Papers 2011R04, Orkestra - Basque Institute of Competitiveness.
    25. Adriana Peluffo, 2016. "The role of investments in export growth," Small Business Economics, Springer, vol. 47(1), pages 115-137, June.

    More about this item

    Keywords

    Exports; profitability; business services enterprises; Germany;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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