Export support is of great help to Danish companies

How does it affect Danish companies' exports when trade counsellors help? And does export support affect Danish companies' pricing, costs and profit margins? A new study that utilises a quasi-natural experiment provides important answers to these questions.

The researchers behind the study analysed data on companies that received help from trade advisors located at embassies and consulates abroad in the years 2002-2015.

‘These advisors offer customised services to help companies overcome non-tariff barriers to trade,’ says Magnus Buus, Assistant Professor at the Department of Economics.

Demand is increasing

The results show that export support from The Trade Council under the Ministry of Foreign Affairs has increased companies' export volumes by approximately 10% annually over a two-year period.

‘This is a significant increase that backs the theory that companies grow in export markets by increasing demand for their products,’ says Magnus Buus.

Interestingly, the researchers found that export support had no significant effect on prices, quality, markups or marginal costs.

‘This indicates that the support primarily helps companies expand their market share without changing their production costs or pricing strategies,’ says Magnus Buus.

Can influence future trade policy

The study, published in the scientific journal Review of Economics and Statistics, contributes valuable knowledge about the mechanisms behind export support and its effect on company performance. This knowledge can be used in the design of future export support programmes, the researchers believe.

‘We show that support programmes can be effective in increasing exports - and thus companies‘ earnings - without necessarily requiring changes in product quality or production costs,’ says Magnus Buus and elaborates:

‘This can be particularly relevant knowledge for politicians and decision-makers who want to promote exports and economic growth through targeted assistance to companies,’ he concludes.

Magnus Buus co-authored the study with Jakob Roland Munch (University of Copenhagen), Joel Rodrigue (Vanderbilt University) and Georg Schaur (University of Tennessee).