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The authors use the unique recently released German business services statistics panel to conduct the first comprehensive empirical study on the relationship between exports and profitability for the business services sector. They document a negative profitability differential of services exporters compared to non-exporters that is statistically significant, though rather small, when observed firm characteristics and unobserved firm specific effects are controlled for. They find that export-starters in services are less profitable than non-starters, even two years before they begin to export, pointing to self-selection of less profitable firms into export markets.
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