Trade in services : IT and task content

In this paper we investigate the determinants of the dramatic increase in services tradability focusing on the extensive margin of the phenomenon. We use balance sheet and firm-level service trade information over the period 1995-2005 provided by the National Bank of Belgium and we merge it with information on the evolution of information technology use and tasks performed by workers from the qualification and career survey provided by the BIBB-IAB. We show that technological change, measured either by the more intensive use of information technologies or by changes in the task content of jobs, has substantially contributed to the increase in the number of service-trading firms. Interestingly, we find evidence of a churning effect. While technological change has induced net entry into service trading, it has also increased the likelihood of both gross entry and exit of firms. Furthermore, our evidence suggests that due to the peculiar nature of services provision, the change in the tasks content of jobs is a better measure of technological change than the use of information technologies. Our results are robust to controlling for service trade liberalization and offshoring.