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International trade in services: firm-level evidence for Portugal

Abstract

This paper adds to the existing firm-level evidence on international trade in non-tourism services, using a new Portuguese database merged with balance-sheet data. In accordance with the literature, we find that a small number of firms that both export and import services (two-way traders) with diversified service and geographical portfolios account for a substantial share of trade flows. Compared with one-way traders, two-way traders are larger, older, more productive, more profitable and have a higher share of foreign equity. Considering all margins of firm-level trade and controlling for firms’ characteristics, the intensive margins of exports and imports of services are positively related to both productivity and profitability. Regarding the extensive margins, the number of services imported is also positively associated with firms’ performance.

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Fig. 1

Notes

  1. Francois and Hoekman (2010) provide a survey of the literature on services trade, while Low (2013) and Heuser and Mattoo (2017) discuss the role of services in global value chains.

  2. GATS defines trade in services in terms of four modes of supply. The four modes are: (1) cross-border supply, (2) consumption abroad, (3) commercial presence, and (4) presence of natural persons. This definition is broader than the BoP concept of services trade, which comprises only transactions between residents of a given country and non-residents, encompassing modes 1, 2, a significant part of mode 4 and a small part of mode 3. See the United Nations Manual on Statistics of International Trade in Services (UN 2010) for a detailed description of the four modes of supply for international services.

  3. More precisely, it excludes firms whose main activity is in sections O - Public administration and defence, compulsory social security (division 84); T - Activities of households as employers; undifferentiated goods and services producing activities of households for own use (division 97 – 98); U - Activities of extraterritorial organisations and bodies (division 99) of the Portuguese statistical classification of economic activities Rev 3 – Classificação Portuguesa das Actividades Económicas (CAE). In addition, most firms in section K - Financial and insurance activities (divisions 64 – 66), like banks and insurance companies, are also excluded from IES, since they have specific accounting reporting requirements and a distinct balance-sheet structure. However, other financial and insurance intermediaries and auxiliaries are available in the database.

  4. Note that the classification of types of services is independent from the one used to assign firms to sectors of economic activity. Firms are officially classified in a sector of CAE according to their main reported activity and import and/or export one or more of the 29 types of services of the EBOPS classification.

  5. Since the differences between one-way and two-way traders are often large, the log approximation understates the size of these gaps. For example, taking exponents of the employment coefficient in column (1) of Table 2, two-way traders have, on average, 107.9 percent more employment (100 ∗ (exp(0.732) − 1) = 107.9).

  6. Appendix E includes some basic descriptive statistics on the three margins of firm-level trade.

  7. We also estimated Eq. 1 including interactions between all variables considered and a dummy variable identifying two-way traders. The coefficients estimated from the fully interacted model and from the separate regressions for one-way and two-way traders presented in Table 5 are equivalent, even if the variance of the different types of traders is allowed to differ in the separate regressions. From the fully interacted model, we can see that the contributions of the three margins differ between the two types of traders in a statistically significant way for both exports and imports at a level of significance of 0.1 percent. All results are available from the authors upon request.

  8. We also estimated a fully differentiated model of Eq. 2, including interactions between all variables and a two-way trader dummy, and the differences in the parameters between the two types of traders are always statistically significant. All results are available from the authors upon request.

  9. All controls have the expected signs. Results reporting the complete set of estimates are available from the authors upon request.

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Acknowledgements

We thank the editor, Daniel A. Dias, and three anonymous referees for their useful comments and suggestions. The authors are also grateful to Fundação Francisco Manuel dos Santos for supporting this project. In particular, Birgitte Ringstad worked in the project while visiting the Economics and Research Department of Banco de Portugal and Nova School of Business and Economics under a grant by this institution. The opinions expressed in the paper are those of the authors and do not necessarily coincide with those of Banco de Portugal, the Eurosystem or Fundação Francisco Manuel dos Santos. Any errors and omissions are the sole responsibility of the authors.

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Appendices

Appendix A: Coverage of the firm-level sample of Portuguese international trade in non-tourism services, 2014-2015

Table 8 Export values of non-tourism services, 2014-2015
Table 9 Import values of non-tourism services, 2014-2015
Table 10 Shares of international traders of non-tourism services in the total of Portuguese non-financial firms by main sector of activity, 2014-2015

Appendix B: Breakdown of the 29 service types in the final firm-level sample of Portuguese international trade in non-tourism services, 2014-2015

Table 11 Types of services exported: Values, firms, countries and transactions, 2014-2015
Table 12 Types of services imported: Values, firms, countries and transactions, 2014-2015

Appendix C: Main partner countries in Portuguese international trade in non-tourism services, 2014-2015

Table 13 Main partner countries - shares in total trade and firms, 2014-2015

Appendix D: Distribution of Portuguese international trade in non-tourism services (values and number of firms) by firm type, 2014-2015

Table 14 International traders of services by firm type and sector of activity, 2014-2015
Table 15 Exports and imports of services by firm type and sector of activity, 2014-2015
Table 16 Percentage shares of traders and trade values by firm type and age group, 2014-2015
Table 17 Percentage shares of traders and trade values by firm type and size category, 2014-2015

Appendix E: Descriptive statistics on firm-level trade margins of Portuguese international traders of non-tourism services, 2014-2015

  Mean Std. Dev. P25 P50 P75
(A) Exports
Total sample of exporters
Total value of a firm’s exports 1879.0 33122.3 17.2 139.3 596.2
Average value per service-country 200.6 822.3 6.1 35.6 140.3
Number of services 1.4 1.0 1.0 1.0 2.0
Number of countries 5.3 9.4 1.0 2.0 5.0
One-way exporters
Total value of a firm’s exports 530.4 10101.9 9.8 77.7 263.7
Average value per service-country 129.0 394.7 4.8 28.4 114.4
Number of services 1.1 0.4 1.0 1.0 1.0
Number of countries 4.1 8.5 1.0 1.0 3.0
Two-way traders
Total value of a firm’s exports 2725.3 41469.4 26.5 217.5 939.2
Average value per service-country 245.5 998.7 7.5 40.6 161.7
Number of services 1.6 1.2 1.0 1.0 2.0
Number of countries 6.0 9.9 1.0 3.0 7.0
(B) Imports
Total sample of importers
Total value of a firm’s imports 998.0 13653.1 2.2 20.5 188.9
Average value per service-country 99.6 1259.7 0.9 4.7 24.6
Number of services 2.2 1.9 1.0 1.0 3.0
Number of countries 4.1 7.0 1.0 2.0 4.0
One-way importers
Total value of a firm’s imports 166.2 1074.5 0.8 5.1 36.4
Average value per service-country 38.4 390.2 0.4 2.0 9.5
Number of services 1.8 1.3 1.0 1.0 2.0
Number of countries 2.2 2.7 1.0 1.0 3.0
Two-way traders
Total value of a firm’s imports 1511.1 17320.9 6.0 53.5 370.4
Average value per service-country 137.4 1571.1 1.6 8.0 36.8
Number of services 2.5 2.1 1.0 2.0 3.0
Number of countries 5.3 8.5 1.0 3.0 6.0
  1. Values of exports and imports are in thousand euros. The firm-level statistics are based on firm-year observations in 2014-2015. The intensive margin of firm-level exports (imports) refers to the average exported (imported) value by a firm per country-service type combination. The service extensive margin of firm-level exports (imports) refers to the number of services exported (imported) by a firm. The geographical extensive margin of firm-level exports (imports) refers to the number of destination (source) countries of a firm. See the main text for more details

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Amador, J., Cabral, S. & Ringstad, B. International trade in services: firm-level evidence for Portugal. Port Econ J 18, 127–163 (2019). https://doi.org/10.1007/s10258-019-00161-4

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Keywords

  • International trade
  • Services
  • Trade margins
  • Firm-level data

JEL Classification

  • F1
  • F14
  • L25