Firm level analysis of international trade in services

IFC Working Papers No 4
March 2010

Introduction

Balance of payments statistics serve as the common basis for analyzing cross-border trade in services, providing information about exports and imports by individual countries or by economic or monetary areas, specified by service categories and partner countries. However, balance of payments statistics do not deliver insight into the facts that determine trade flows as the decisions related to trading services are taken by companies rather than countries. Consequently, analysis has to turn to the firm level to highlight trading, especially exporting patterns, taking company structures into account. The results may serve interest groups, politicians, business and industry as important sources of information for economic decisions and policy making.

In Austria, the central bank is in charge of compiling balance of payments statistics. In 2006, a major change in data collection was introduced; since then, micro data on exports and imports of services (except travel) have been collected in close cooperation with Statistics Austria, replacing the former banks' records on payment transactions. The structural change in data collection has very positively affected the available detail as well as the methodological quality of statistics on international trade in services. Besides, data on exports and imports per service category and partner country are available on a per-enterprise basis and may be linked with structural or company register information, e.g. about company headquarters, sales revenues, the number of employees and about outward and inward FDI or with foreign trade statistics data.

Starting 2006, the central bank linked survey data about trade in services with business statistics. Micro data analysis indicates that nearly 5,000 nonfinancial enterprises were engaged in international trade in services in Austria. Their economic activities involved some 774,000 employees, sales revenues of about EUR 250 billion, of which service export revenues of about EUR 20 billion, and service import expenditures of roughly EUR 15 billion. The central bank comes to the conclusion that Austria does not feature "typical" service exporters. Much rather, it is possible to distinguish between various types of service traders: (1) network industries, where exports are intrinsic to the system (the postal, telecommunications and transport services); (2) technology-intensive parts of the manufacturing industry, including e.g. the automotive industry, chemicals and TV and radio broadcasting; (3) transnational enterprises that organize their production on a world-wide basis and maintain research centres in Austria; (4) group management providing a broad range of services, e.g. advertising, legal consultancy and financial services; and (5) local, specialized companies in areas such as technology and management consultancy.

This working paper introduces the reader to the survey design in Austria (chapter 1) and gives an overview of the trading patterns which time series analysis of the balance of payments reveals (chapter 2). It then describes the data available for analyzing international trade in services on the firm level (chapter 3.1) to explain the structures observed in the balance of payments (chapter 3.2 to 3.8) with regard to possible determinants such as the place of location, trading partners, company size, group activities and linkages between trade in services and trade in goods. The paper also summarizes regression results of export revenues and import expenditures against the 13 variables available on the firm level (chapter 4) before the analytical findings are summarized (chapter 5) and the data set is presented in detail (Statistical Annex).