Productivity and Trade Orientation inUK Manufacturing

Within a structural model we explicitly allow for the trade orientation of companies to estimateproductivity dynamics within 4-digit UK manufacturing industries. We use the FAME data onUK companies over the period 1994-2003. Following Ackerberg et al. (2005) we adjust thealgorithm in Olley and Pakes (1996) by augmenting investment and exit decisions to allow forexogenous demand shocks by trade orientation, assuming that labour and capital are statevariables, and productivity follows a first-order Markov process...