A model of the behaviour of Vietnamese SOE's during the reform period

Abstract

[Introduction]: In an attempt to understand the behaviour of SOEs in their operation, this paper reports the construction of an econometric model designed to analyse the effects of government policies on the behaviour of industrial SOEs in Vietnam during the period under study. Part 1 describes the model, beginning with the specification of the production function of SOEs. The section following describes the income and utility functions assumed. A section on the production function, which includes a workers’ effort variable, concludes part 1. Part 2 is about the determinants of total factor productiviety (TFP) and analysis of the level of TFP at different stages of the reform process. Part 3 focuses on the profitability and the optimal level of indirect costs of production (i.e., marketing and administrative expenses) from the point of view of the SOE. It outlines a framework for the analysis of the effects on profit and indirect costs of subsidy policies and the assessment criteria applied to SOEs. Part 4 concludes.