Public export credit insurance in the Netherlands: An input–output approach

• Author: Marcel Berg,Tommy Span,Adam N. Walker,Ilke Van Beveren,Oscar Lemmers
• Date: 01 September 2019
• Published date: 01 September 2019
• DOI: http://doi.org/10.1111/twec.12824

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wileyonlinelibrary.com/journal/twec World Econ. 2019;42:2774–2789.

© 2019 John Wiley & Sons Ltd

Received: 21 January 2018

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Revised: 8 April 2019

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Accepted: 7 May 2019

DOI: 10.1111/twec.12824

ORIGINAL ARTICLE

Public export credit insurance in the Netherlands:

An input–output approach

Marcelvan den Berg1

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IlkeVan Beveren2

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OscarLemmers1

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TommySpan1

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Adam N.Walker1

1Centraal Bureau voor de Statistiek, Heerlen, The Netherlands

2De Nederlandsche Bank, Amsterdam, The Netherlands

Funding information

Ministry of Financial Affairs of the Netherlands

KEYWORDS

credit insurance, exports, GDP, input–output analysis

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INTRODUCTION

One of the most widespread forms of export promotion around the globe is public export credit insur-

ance. Public export credit insurance provides firms with the possibility to insure credit risks associated

with high‐risk export transactions. The facility is available for transactions which are impossible to

insure on the private commercial insurance market because of the specific combination of the ma-

turity of the credit provided, the sheer size of the transaction, the risk profile of the debtor and the

destination country of the exports. This paper concerns the economic impact of public export credit

insurance in the Netherlands. Typical examples of activities that frequently rely on public export credit

insurance in the Netherlands include ship building and offshore and dredging works.

Public export credit insurance is a common form of export promotion amongst governments around

the world, with both private and public export credit insurance agencies from 73 countries united in

the Berne Union.1

The United Kingdom was the first country to put a public export credit facility in

place in 1919. Soon other European governments followed and 15 countries, including the Netherlands,

were providing some form of public export credit insurance by the year 1934 (Dietrich, 1935). Despite

its commonness, public export credit insurance has been subjected to surprisingly little academic

1 See www.berne union.org.

All authors are affiliated with Statistics Netherlands, the Hague/Heerlen, the Netherlands, except Ilke Van Beveren, who is

affiliated withDe Nederlandsche Bank. This paper is derived from research commissioned by the Dutch Ministry of Financial

Affairs, see Van den Berg, Lemmers, Span, Van Beveren, and Walker (2016). The data that support the findings of this study

are not available due to confidentiality considerations. The content of this publication does not reflect the official opinion of

Statistics Netherlands, De Nederlandsche Bank or the Dutch Ministry of Financial Affairs. Responsibility for the information

and views expressed in the paper lies entirely with the authors. Any errors are our own.

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research thus far. The few studies available (see Section 2) generally rely on the standard gravity

model of trade, investigating to what extent credit insurance is associated with gross exports. We add

to this literature by adopting an input–output (IO) approach. This alternative approach enables us to

be the first to analyse the effects of public export credit insurance on employment, value added and

GDP.

Ideally, analysis of the public export credit insurance facility (ECIF) would consider the extent

to which it provides additionality with respect to the base case. In other words, analysis should take

account of the fact that at least some exports covered by the ECIF may take place without ECIF

coverage. Accordingly, the analysis would wish to identify and separate from all publicly insured

exports that part which would have taken place without the availability of the ECIF. By considering

only the part which would not occur without ECIF coverage, the analysis would properly account for

the additionality of the ECIF. Results relating to the additionality of the ECIF are clearly valuable in

evaluating policy effectiveness. Even though the degree of additionality of the public ECIF is theoret-

ically considerable, given that only exports that cannot be insured on the private market are eligible for

insurance, the possibility remains that part of the exports would have been realised even without the

backing of the public ECIF. Nonetheless, addressing this endogeneity issue is far from trivial since the

counterfactual scenario—what would have happened without the public ECIF?—is unobservable. In

addition, because the public ECIF only insures export transactions additional to the private insurance

market, a proper control group simply does not exist. This makes econometric research techniques

such as propensity score matching, which are frequently employed in research of the effectiveness of

other export promotion schemes, not a viable option. In that sense, addressing this issue requires a

different approach in the case of a public facility such as the ECIF.

With this context in mind, we arrive at the research questions of this paper:

• What is the contribution of the exports insured by the public export credit insurance facility to

Dutch GDP and employment?

• Is it possible to assess t he degree of additionality of public export credit insurance and move from

a gross to a net contribution of the public ECIF to Dutch GDP and employment?

Our contribution to the literature is threefold. First, to the best of our knowledge we are the first to in-

vestigate the impact of the public ECIF in an input–output framework as existing work on export credit

insurance is principally based on the gravity model of trade. Using the input–output approach reveals

the value added and employment generated by ECIF‐insured exports. Contrary to existing work, this

approach enables us to link export promotion directly to GDP, also assigning value added and employ-

ment to the industries involved in the value chains of these exports. This provides a new perspective on

the merits of export promotion, both academically and from a policy standpoint. Second, even though

many governments offer public export credit insurance facilities of some form, academic research of the

impact and effectiveness of this particular type of export promotion is still scant relative to the body of

empirical work available on other types of export promotion. We add to the still small body of evidence by

investigating public export credit insurance in the Netherlands, a small and open economy that depends on

foreign demand for about 30% of its GDP (Voncken, Lemmers, Rozendaal, & van Berkel, 2015). Third,

even though the issue of endogeneity in research of the effectiveness of export promotion programmes

is usually addressed econometrically, no attempts have been done—as far as we know—to empirically

investigate to what extent endogeneity is actually an issue in this type of research. We contribute to this

strand of literature by confronting the use of the public ECIF with detailed trade data in an attempt to

investigate to what extent the facility was in fact crucial to the realisation of the transaction.