The Role of Cost Related Factors in the Competitiveness of European Services

Abstract

The emergence of service offshoring places competitiveness at the centre of the discussion on international trade and business. Service competitiveness factors remain a field that is largely unexplored. This paper addresses the role of cost related factors explaining service competitiveness. It empirically tests trade performance of 15 European countries in 8 service markets in order to observe the role of cost factors, country effects and industry specific patterns. A model based on cross section and panel data regressions is suggested in order to test the influence of cost determinants and their elasticities. Results show great heterogeneity among service activities and suggest the importance of non-cost related factors within European Union countries.