Export transitions and firm productivity

What is it about?

This paper, by exploring the enriched information in annual Vietnamese enterprise surveys from 2010 to 2015, tries to shed light on the causal effect of the various statuses of export transitions on total factor productivity occurring across 20 manufacturing sectors and during various phases of export transition. The empirical results derived from the system GMM estimation provide evidence of causal direction from export transitions to total factor productivity, after controlling for endogenous variables and taking firm heterogeneity into account. Our results indicate that export effects on productivity are highly dependent on specific manufacturing sectors, and on type of export transition. From the perspective of trade and industrial policies, while supporting the creation of new exporters, some issues related to a high level of subsidy and tax incentives by the government to every exporting firm and export-oriented unit in every manufacturing sector seem to be questionable.

Featured Image

Photo by Tron Le on Unsplash

Photo by Tron Le on Unsplash

Why is it important?

A huge number of studies have investigated the causal relationship between exporting and productivity at firm level and one important issue has been the hypotheses of learning-by-exporting (export newcomers have higher productivity than non-exporters in the post-entry period). Despite a great treasure of empirical literature on these issues, the overall results are rather mixed and inconclusive (for a positive conclusion, see, Maggioni (2012), Martins and Yang (2009), Tse, Yu, and Zhu (2017) and Wagner (2007); and for the opinion that exporting confers little or no benefit in productivity growth, see, Bernard and Jensen (1999, 2004), Clerides, Lach, and Tybout (1998), Delgado, Farinas, and Ruano (2002) and Sharma and Mishra (2011)). The relationship of exports and TFP in the context of Vietnamese manufacturing firms is relevant for various reasons. Since ‘Doi Moi’ (renovation) in 1986, due to several policies, such as the abolition of import and export licences, reduction in tariff rates through various regional trade agreements, and the liberalisation of restrictions on foreign capital, the manufacturing sector has grown manifold and emerged as a significant sector in the country. The contribution of manufacturing was around 15.0% of total GDP, with an average growth rate of 14.4% in 2017. This sector is considered to be an engine of growth for the Vietnamese economy due to its pivotal role in industrialisation.