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Exports and Profitability – First Evidence for German Business Services Enterprises

  • Alexander Vogel

    ()

    (Institute of Economics, University of Lüneburg)

  • Joachim Wagner

    ()

    (Institute of Economics, University of Lüneburg)

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.

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Paper provided by University of Lüneburg, Institute of Economics in its series Working Paper Series in Economics with number 129.

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Length: 39 pages
Date of creation: May 2009
Date of revision:
Handle: RePEc:lue:wpaper:129
Contact details of provider: Web page: http://leuphana.de/institute/ivwl.html

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  1. Andrew Bernard & J. Bradford Jensen & Stephen Redding & Peter Schott, 2007. "Firms in International Trade," Working Papers 07-14, Center for Economic Studies, U.S. Census Bureau.
  2. Thierry Mayer & Gianmarco Ottaviano, 2007. "The happy few: the internationalisation of European firms New facts based on firm-level evidence," Sciences Po publications info:hdl:2441/10147, Sciences Po.
  3. 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.
  4. Patrick Musso & (isgep) The International Study Group On Exports And Productivity, 2008. "Understanding cross-country differences in exporter premia - Comparable Evidence for 14 Countries," Post-Print halshs-00720911, HAL.
  5. Alexander Eickelpasch, 2008. "Export Orientation of Service Companies on the Increase," Weekly Report, DIW Berlin, German Institute for Economic Research, vol. 4(5), pages 28-35.
  6. Wagner, Joachim, 2002. "Unobserved firm heterogeneity and the size-exports nexus : evidence from German panel data," HWWA Discussion Papers 194, Hamburg Institute of International Economics (HWWA).
  7. The International Study Group on Exports and Productivity, . "Exports and Productivity – Comparable Evidence for 14 Countries," Discussion Papers 07/41, University of Nottingham, GEP.
  8. repec:spo:wpecon:info:hdl:2441/10147 is not listed on IDEAS
  9. Thierry Mayer & Gianmarco Ottaviano, 2008. "The Happy Few: The Internationalisation of European Firms," Intereconomics- Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 43(3), pages 135-148, May.
  10. Schank, Thorsten & Schnabel, Claus & Wagner, Joachim, 2007. "Do exporters really pay higher wages? First evidence from German linked employer-employee data," Journal of International Economics, Elsevier, vol. 72(1), pages 52-74, May.
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