Decomposing Services Exports Adjustments along the Intensive and Extensive Margin at the Firm-Level
26 February 2015 4:00 pm
Elisabeth Christen, WIFO
wiiw, Rahlgasse 3, 1060 Vienna, lecture hall (entrance from the ground floor)
Using a comprehensive and unique data set of Austrian service exporting ﬁrms provided by the Austrian central bank (OeNB) this paper empirically examines the determinants of service exports at the ﬁrm/destination country level. Based on a Heckman sample selection gravity model, the paper introduces a new approach to decompose expected ﬁrm-level services exports into changes at the intensive and the extensive margins of adjustment as a response to counterfactual changes in exogenous variables. Speciﬁcally, we consider several counterfactual scenarios including the (hypothetical) reduction of trade costs, changes in destination market size and enhanced ﬁrm productivity. Our results suggest that export market growth and a reduction in distance related trade costs exert the relative strongest impact on the entry into new markets. Policies aiming at promoting ﬁrm productivity also have the potential to broaden the exporter base and play an important role for trade deepening.
Keywords: Service trade, Firm-level evidence, Firm heterogeneity, Gravity model, Sample selection, Intensive and extensive margin of trade
JEL classification: C15, C21, D21, F14, L20, L80