Productivity and Trade Orientation in UK Manufacturing
AbstractWithin a structural model we explicitly allow for the trade orientation of companies to estimate productivity dynamics within 4-digit UK manufacturing industries. We use the FAME data on UK companies over the period 1994-2003. Following Ackerberg et al. (2005) we adjust the algorithm in Olley and Pakes (1996) by augmenting investment and exit decisions to allow for exogenous demand shocks by trade orientation, assuming that labour and capital are state variables, and productivity follows a first-order Markov process. We extend the framework further by allowing exporting to be an additional control variable that is driven by lagged productivity as in Melitz (2003), leading productivity to follow a second-order Markov process. We find that over the period of introduction of the Euro improvements in aggregate productivity were driven by exporters – mainly by market share reallocations away from inefficient and towards efficient export companies. Aggregate productivity also benefited from improvements in productivity of non-exporters but was driven by improvements within companies rather than by market share reallocations. In a period of sustained real exchange rate appreciation both export cleansing and competitive pressure on non-exporters seem to have contributed to improvements of productivity in the UK manufacturing.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2808.
Length: 32 pages
Date of creation: May 2007
Date of revision:
Publication status: published in: Oxford Bulletin of Economics and Statistics, 2009, 71 (6), 821-849
Contact details of provider:
Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany
Other versions of this item:
- Marian Rizov & Patrick Paul Walsh, 2009. "Productivity and Trade Orientation in UK Manufacturing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(6), pages 821-849, December.
- F14 - International Economics - - Trade - - - Empirical Studies of Trade
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-30 (All new papers)
- NEP-BEC-2007-06-30 (Business Economics)
- NEP-EEC-2007-06-30 (European Economics)
- NEP-EFF-2007-06-30 (Efficiency & Productivity)
- NEP-INT-2007-06-30 (International Trade)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
- Ackerberg, Daniel & Lanier Benkard, C. & Berry, Steven & Pakes, Ariel, 2007. "Econometric Tools for Analyzing Market Outcomes," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 6, chapter 63 Elsevier.
- Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
- Aw, B. -Y. & Hwang, A. R., 1995. "Productivity and the export market: A firm-level analysis," Journal of Development Economics, Elsevier, vol. 47(2), pages 313-332, August.
- Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November.
- Disney, Richard F & Haskel, Jonathan & Heden, Ylva, 2000.
"Restructuring And Productivity Growth In UK Manufacturing,"
CEPR Discussion Papers
2463, C.E.P.R. Discussion Papers.
- Richard Disney & Jonathan Haskel & Ylva Heden, 2003. "Restructuring and productivity growth in uk manufacturing," Economic Journal, Royal Economic Society, vol. 113(489), pages 666-694, 07.
- Ariel Pakes, 1991. "Dynamic Structural Models: Problems and Prospects. Mixed Continuous Discrete Controls and Market Interactions," Cowles Foundation Discussion Papers 984, Cowles Foundation for Research in Economics, Yale University.
- Van Biesebroeck, Johannes, 2005. "Exporting raises productivity in sub-Saharan African manufacturing firms," Journal of International Economics, Elsevier, vol. 67(2), pages 373-391, December.
- Rizov, Marian & Pokrivcak, Jan & Ciaian, Pavel, 2012.
"CAP subsidies and productivity of the EU farms,"
2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil
124970, International Association of Agricultural Economists.
- Marian Rizov, 2011.
"Is there a limit to agglomeration? Evidence from productivity of Dutch firms,"
ERSA conference papers
ersa11p231, European Regional Science Association.
- Rizov, Marian & Oskam, Arie & Walsh, Paul, 2012. "Is there a limit to agglomeration? Evidence from productivity of Dutch firms," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 595-606.
- Marian Rizov & Patrick Paul Walsh, 2011.
"Is There a Rural-Urban Divide? Location and Productivity of UK Manufacturing,"
Taylor & Francis Journals, vol. 45(5), pages 641-656.
- Marian Rizov & Paul Walsh, 2011. "Is there a rural-urban divide? Location and productivity of UK manufacturing," ERSA conference papers ersa10p162, European Regional Science Association.
- Marian Rizov & Patrick Paul Walsh, 2009. "Is there a rural-urban divide? Location and Productivity of UK manufacturing," Working Papers 200927, Geary Institute, University College Dublin.
- Kazukauskas, Andrius & Newman, Carol F. & Thorne, Fiona S., 2010. "Analysing the Effect of Decoupling on Agricultural Production: Evidence from Irish Dairy Farms using the Olley and Pakes Approach," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 59(3).
- Rizov, Marian & Pokrivcak, Jan & Ciaian, Pavel, 2013. "CAP Subsidies and the Productivity of EU Farms," Factor Markets Working Papers 148, Centre for European Policy Studies.
- Smeets, Valérie & Warzynski, Frédéric, 2010. "Learning by Exporting, Importing or Both? Estimating productivity with multi-product firms, pricing heterogeneity and the role of international trade," Working Papers 10-13, University of Aarhus, Aarhus School of Business, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak).
If references are entirely missing, you can add them using this form.