Crisis-Proof Services: Why Trade in Services Did Not Suffer During The 2008-2009 Collapse

During the 2008-2009 crisis trade in goods experienced the deepest decline ever recorded. Surprisingly, trade in services lived through the crisis unharmed and some service categories carelessly stuck to their growth paths. Using firm-product-destination exports for Belgium, we show that the special resilience of services is explained by a significantly lower elasticity to demand in export markets. In particular, services exports tend to decrease on average 5% less than exports of goods following a 1% decrease in GDP growth in destination countries. Most of this effect is accounted by business services, it is more pronounced with respect to durables than to consumable products and it is stronger for OECD exports than for non-OECD. In terms of economic magnitude, if goods had the same elasticity to GDP growth of services, they would have decreased of about half. Conversely, if services had the same elasticity of goods, their fall would have been more than thrice as much.

• This seminar is organised due to the job opening of assistant professor we currently have in the Organisation, Strategy and Entrepreneurship group.