Luận văn thạc sĩ UEH impacts of foreign dirrect investment on labor productivity of manufacturing

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UNIVERSITY OF ECONOMICS

HO CHI MINH CITY

VIETNAM

INSTITUTE OF SOCIAL STUDIES

THE HAGUE

THE NETHERLANDS

VIETNAM- NETHERLANDS

PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

IMP ACTS OF FOREIGN DIRECT INVESTMENT

ON LABOR PRODUCTIVITY OF

MANUFACTURING INDUSTRY:

A CASE OF VIETNAM

BY

VO KHOI NGUYEN

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

HO CHI MINH CITY, APRIL 2011

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'

UNIVERSITY OF ECONOMICS

HO CHI MINH CITY

VIETNAM

INSTITUTE OF SOCIAL STUDIES

THE HAGUE

THE NETHERLANDS

VIETNAM- NETHERLANDS

PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

IMP ACTS OF FOREIGN DIRECT INVESTMENT

ON LABOR PRODUCTIVITY OF

MANUFACTURING INDUSTRY:

A CASE OF VIETNAM

A thesis submitted in partial fulfilment of the requirements for the degree of

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

By

VO KHOI NGUYEN

Academic Supervisor:

PhD. NGUYEN VAN PHUONG

HO CHI MINH CITY, APRIL 2011

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CERTIFICATION

I hereby certify this thesis has not been submitted for any degrees and is not being

currently submitted for any other degrees.

I also certify that, to the best of my knowledge, and any help received in preparing the

thesis and all sources used have been acknowledged in the thesis.

Signature

Vo Khoi Nguyen

Date: April, 2011

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ii'

ACKNOWLEDGEMENT

With the valuable guidance and advices from Vietnam-Netherlands program lecturers

and friends, I am really grateful to what they have done for my thesis completion.

First of all, I would like to illustrate my largest gratitude to my supervisor, PhD.

Nguyen Van Phuong who always gives useful and valuable advices and enthusiastic

comments for my thesis.

I am grateful for Professor, Peter Calkins for his precious advice and comments from

the initial ideas of the thesis.

I also express my special thanks to Professor, Nguyen Trong Hoai for his lectures in

econometrics and PhD. Cao Hao Thi, the lecturer of Vietnam-Netherlands project, for

his kind help and instructions in data analysis by Eview software.

And finally, I would like to show my special thanks to my friends in MDE class 15 for

their supports during my research completion.

II

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'

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ABSTRACT

The paper exammes whether foreign direct investment mcreases the overall labor

productivity in Vietnam. Using panel data at firm level from the manufacturing sector,

it finds robust evidence of the positive impacts from foreign direct investment on labor

productivity. Moreover, it also confirms the positive correlation of labor productivity

and capital intensity, labor quality and economic scale. However, it should fail to

establish any significant relationships between productivity and location; and industry.

And the findings illustrate foreign enterprises do not make more productive than

private firms.

Ill

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TABLE OF CONTENTS

CHAPTER 1 INTRO D U CTI 0 N -------------------------------------------------------------- 1

1.1. Introduction --------------------------------------------------------------------------------- 1

1.2. Research objective and questions-------------------------------------------------------- 2

1.3. Research hypotheses----------------------------------------------------------------------- 2

1.4. Organization of the study -----------------------------------------------------------------2

CHAPTER 2 LITERATURE REVIEW----------------------------------------------------- 3

2 .1. Theoretical background ------------------------------------------------------------------- 3

2.2. Economic theories-------------------------------------------------------------------------- 4

2.2.1. Cobb-Douglas production function------------------------------------------------------ 4

2.2.2. Theoretical framework ofFDI impact on labor productivity ------------------------5

2 .3. Empirical studies --------------------------------------------------------------------------- 6

2.3 .1. Channel effects of foreign direct investment------------------------------------------- 6

2.3 .2. Impacts of FDI on labor productivity --------------------------------------------------- 7

2.4. Summary ------------------------------------------------------------------------------------ 8

CHAPTER 3 AN OVERVIEW OF FDI IN VIE TN AM---------------------------------- 9

3 .1. Introduction --------------------------------------------------------------------------------- 9

3 .2. Overview of FDI inflows ( 1988-2009) -------------------------------------------------- 9

3.2.1. FDI inflows in period 1988 - 2009------------------------------------------------------- 9

3.2.2. Some characteristics of foreign direct investment in Vietnam--------------------- 11

3 .3. The role of FDI in national economy-------------------------------------------------- 19

3.3.1. The role ofFDI in national economic growth---------------------------------------- 20

3.3 .2. The role of FDI in employment and human resources ------------------------------ 21

3 .4. Overview of labor productivity in A SEAN------------------------------------------- 21

IV

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