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Linking Productivity to Trade in the Structural Estimation of Production within UK Manufacturing Industries

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  • Marian Rizov
  • Patrick Paul Walsh

Abstract

We estimate productivity dynamics within 4-digit manufacturing industries, using FAME data on UK Companies, from 1994 to 2003. We extend the algorithm in Olley and Pakes (1996) to allow for a selection bias driven by the Melitz (2003) effect (high productivity types selecting to exporting) to get more consistent and unbiased estimates of the parameters of the production function. We demonstrate a link between trade orientation and productivity within industries that is driven by selection, not by learning. Hence aggregate productivity is driven by market share reallocations amongst companies rather than from improvements in company level productivity.

Suggested Citation

  • Marian Rizov & Patrick Paul Walsh, 2005. "Linking Productivity to Trade in the Structural Estimation of Production within UK Manufacturing Industries," The Institute for International Integration Studies Discussion Paper Series iiisdp98, IIIS.
    • Handle: RePEc:iis:dispap:iiisdp98
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    References listed on IDEAS

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    Cited by:

    1. Anze Burger & Crt Kostevc, 2006. "In search of true productivity differences," LICOS Discussion Papers 17006, LICOS - Centre for Institutions and Economic Performance, KU Leuven.

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    More about this item

    Keywords

    Simultaneity; Selection (Exit and Trade) Biases; Productivity Dynamics; UK Manufacturing Companies; within 4-digit industries.;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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