Determinants of financial and insurance & pension services export

After the WWII, the service sector gained importance in many economies and services have been fast growing portion of world trade. According to World Bank statistics, service export increased approximately 15 times between 1980 and 2019. Since services are supplied as an input into the production of goods, they account is about 50% of world trade. It means that services account for over two-thirds of global economic output and employment in developing countries and four-fifths in developed ones. According to EBOPS 2010 service classification, two diffeent service categories are financial and insurance & pension services. The share of financial service sector in global trade has grown since 1980s by encouraging both the national and global economic growth via financial intitutions and intermediaries. Financial system of a country is regarded as a source of comparative advantage and trade. Also, although insurance service is different service category from financial service, it promotes the financial service category. As we consider the close association of these two service categories with each other and increasing importance and volume in global trade, we show a holistic approach by handling with these two service categories together based on the most recent classification EBOPS 2010. Hence, the purpose of this study is to examine the main determinants of financial and insurance & pension services export as service categories of increasing importance and volume. Specifically, it analyzes the impacts of changes in FDI inflows and outflows, financial institutions depth, corruption perception index, GDP (constant 2010 US$) and FED funds rate on financial and insurance & pension services export. This study uses annual panel data from 2005 through 2018 for 82 high and middle-income countries. Panel Fixed Effect (FE) model is applied to identify the impact of determinants of financial and insurance & pension services export. As a result, this study gives evidence that financial institutions depth and GDP in high-income countries have positive impacts on the financial and insurance & pension export. For middle-income countries, financial institutions depth, GDP, and FDI outflow variables promote export of financial and insurance & pension services. Since this thesis study that formulate the determinants of financial and insurance & pension services export is the first, it endeavours to contribute the literature of service export. In addition to this, it gives evidence that there is a great opportunity for middle-income countries if they pay attention to the financial and insurance & pension services by eliminating structural gaps in their services sector with their economic policies. Besides of leading exporters, when middle-income countries expand the depth of financial institutions and develop foreign capital flows for this expansion, they will make a great contribution to their balance of payments. Hence, it is foreseen that high and middle-income countries will provide economic, legal, human, and technological development on the way to financial and insurance & pension services exports.