Business Travels, Multinational Firms and International Trade

Abstract

Business travels are a key driver of growth as they contribute to knowledge diffusion and innovation. They are also a relevant component of services trade. This paper analyzes the determinants of business travels expenditure in Italy, where this phenomenon is relevant and it is concentrated in few Italian regions. Using a “unilateral” gravity approach, I find significant correlations between trade flows, FDI stocks and business travel expenditures. Identification is addressed using inverse measures of offshorable and of routinary tasks, instrumental variables and selection methods. The analysis highlights that the pattern of business travels expenditure is shaped to some extent by the business cycle of partner countries relative to that of Italian regions. Moreover, the pattern is determined to a Greater extent by activities that are least intensive in offshorable or routinary tasks. This second result suggests that remote controls systems substituted only more standardized activities. Indeed, broadband diffusion in the partner countries reduced business travels expenditure only in more routinary sectors. Overall this evidence is consistent with the view that business travels have been affected by the recent developments in ICT.