Sources of productivity growth in Vietnam: Three essays
Date
2022
Authors
Le, Phan
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This thesis examines the sources of productivity growth in Vietnam, a developing country that has been transitioning from a centrally-planned economy to a more market-oriented one since 1986. Following the introduction, which sets the motivation and scope of the study, the thesis is organised into three core chapters, composed of self-contained articles. The first two core chapters focus on the within-firm determinants of productivity, namely the persistence of export activities and the transition into the formal business sector. The third core chapter investigates the between-firm (mis)allocation of capital that impacts aggregate productivity. The final chapter summarises the main findings and draws conclusions.
Chapter Two examines the relationship between export and firm learning, with evidence provided on the learning mechanisms of exporters in Vietnam during the period 2010 to 2017. Using a dynamic panel data model, estimated by the generalised method of moments technique, the paper reveals opposite patterns of learning between exporters who pursue their export activities persistently and intermittent exporters whose export is merely a temporary activity. The former experience a U-shaped pattern of ex-post productivity, while the latter exhibit an inverted U-shaped pattern. The paper also finds that compared with intermittent exporters, persistent exporters are more likely to receive technology transfer from foreign buyers and are more likely to invest in technology, infrastructure and staff training in order to meet the requirements of export contracts. These findings help explain why previous studies that treated exporters as a homogeneous group tend to find ambiguous evidence of learning by exporting.
Chapter Three examines the transition of Vietnam's informal household businesses into formal firms and its impacts upon firm-level productivity and incurred informal costs. Based on a panel dataset of formal and informal firms during 2007-2015, the paper employs a matched difference-in-difference approach to find that such transition, known as 'formalisation', leads to higher investment, greater capital stock and an increase in labour productivity, which ranges between 23 and 82 percent. There is no statistically significant surge in total factor productivity, implying that the gain in labour productivity comes from capital deepening rather than true innovation. In addition, the paper finds that household firms have to incur higher informal costs after joining the formal sector.
Chapter Four examines capital misallocation of manufacturing firms in Vietnam during the period 2008 to 2017. The paper adopts a general equilibrium model to disentangle the roles of the three sources of capital misallocation: adjustment costs, uncertainty and policy distortions. The theoretical model is then estimated via the moment matching technique that seeks to minimise the equally weighted distance between simulation model values and observed values of the targeted moments. The paper finds that overall, distortions create a productivity gap of 147 percent relative to the undistorted first-best level, meaning that productivity can more than double the current level if capital is efficiently allocated. Among the difference sources of misallocation, adjustment costs play a negligible role compared with uncertainty and policy distortions. The latter account for 81 percent of capital misallocation in Vietnam and a productivity gap of 110 percent relative to the first-best level. State ownership policy alone accounts for a 38-percent loss of aggregate manufacturing productivity, indicating the urgency of reforming state-owned enterprises and ensuring a level-playing field regardless of ownership forms.
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