Determinants of Exports of Services Firm-Level Analysis Combined With the Gravity Model Framework

Abstract

We analyse the exports of services of Polish firms and formulate several hypotheses. First, the analytical framework of Melitz (2003) and Bernard et al. (2011) models can also be applied to explain the service exports. Second, the service exports can accompany the merchandise exports. Third, other firm-level variables used in empirical studies analysing determinants of merchandise exports—such as scale economies or internationalisation—can also be applied to analyse service exports. Fourth, the gravity model of merchandise trade can help explain the geographical structure of service exports. Fifth, service exports can be affected by the trade barriers measured as aggregated Services Trade Restrictiveness Index (STRI). In our analysis, we merge granular data on Poland's firms (ITSS), containing information on the geographical structure of exports, with the ORBIS database. First, we estimate how TFP and other firm-level variables affect export performance and then check the robustness of our estimations. Second, we estimated the gravity model and then we used Poland's ITSS database to re-estimate the firm-level model, introducing gravity variables. Our estimates confirm the importance of productivity (TFP) and other firm-level characteristics for service export performance. However, we could not confirm the statistical significance of the standard gravity model and STRI variables.