Working Paper: Everything you always wanted to know about Latvia's service exporters (but were afraid to ask)

Working Paper 6/12

ABSTRACT

We provide a set of stylised facts about Latvia's firms engaging in service exports, using detailed firm-level datasets for 2006–2013. We show that the fraction of firms involved in service exports is small, but the numbers of service exporters are on average bigger than of non-exporters and goods exporters. Service exporters also appear more productive than non-exporters and goods exporters, although this finding may be attributed mainly to innovative, knowledge-based sectors of the economy. We have also shown tentative evidence in favour of self-selection of productive firms in service exporting which warrants further investigation. The study suggests that it might be more difficult to enter the pool of service exporters than goods exporters, since the service market has historically been highly regulated in Latvia's major trading partners, and efforts necessary to become a service exporter are larger than those needed to become a goods exporter.In a nutshell, the study enhances understanding of the relationship between trade behaviour and performance of service providers; likewise, it presents insight into how service and goods exporters compare. It complements the existing sparse set of empirical firm-level studies on service trade with evidence of a small open euro area economy.

Keywords: service trade, productivity, firm performance, micro data

JEL codes: D22, F10, F14