Luận văn thạc sĩ UEH productivity growth, technological progress and efficiencychanges in vietnamese

UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES

HO CHI MINH CITY THE HAGUE

VIETNAM THE NETHERLANDS

VIETNAM - NETHERLANDS

PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

PRODUCTIVITY GROWTH,

TECHNOLOGICAL PROGRESS AND

EFFICIENCY CHANGES IN VIETNAMESE

HIGH-TECH INDUSTRIES

BY

DAO HOANG BINH THIEN

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

HO CHI MINH CITY, January 2015

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UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES

HO CHI MINH CITY THE HAGUE

VIETNAM THE NETHERLANDS

VIETNAM - NETHERLANDS

PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

PRODUCTIVITY GROWTH,

TECHNOLOGICAL PROGRESS AND

EFFICIENCY CHANGES IN VIETNAMESE

HIGH-TECH INDUSTRIES

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

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

By

DAO HOANG BINH THIEN

Academic Supervisor:

Dr. TRUONG DANG THUY

HO CHI MINH CITY, January 2015

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ABSTRACT

Recently, Vietnamese high-tech industries have been receiving attention from

both the government, foreign companies, as well as the private sector due to the

notable figures of export values (Ministry of Trade and Industry [MoIT] & United

Nations Industrial Development Organization [UNIDO], 2011). This thesis attempts

to estimate the productivity growth of Vietnamese high-tech manufacturers and its

sources of growth. Stochastic Production Frontier (SPF) approach is applied to the

2000-2012 panel dataset of Vietnamese high-tech manufactures, which are divided

in 5 sub-industries. Total Factor Productivity (TFP) is then measured and

decomposed to three sources, namely Technological progress (TP), Technical

efficiency changes (TEC), and Scale change effects (SCE). Three different technical

inefficiency effects models are also applied to investigate the determinants of

technical efficiency. The empirical results show considerable controversy in both

signs and magnitudes of TFP and its components, TE and its determinants across

models. However, in general, maximum likelihood estimates show that TFP is not the

main source of output increase. Furthermore, the productivity and efficiency of

Vietnamese high-tech manufacturers are unlikely to change largely over time.

Nevertheless, there are differences of technical inefficiency effects across regions,

sub-industries, firm sizes, and type of ownerships.

Keywords: Vietnam, High-tech, manufacturing, productivity, TFP,

Technological progress, Technical efficiency, Scale change effects

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ACKNOWLEDGEMENT

I have taken efforts in this thesis. However, it would not have been completed

without supports of many individuals and organizations. I would like to express my

appreciation to all of them.

I would like to give special thanks to my academic supervisor, Dr. Truong

Dang Thuy, whose comments and encouragement helped me to write this thesis.

Furthermore, I would also like to acknowledge the Scientific Committee and

the staff of Vietnam-Netherlands Programme for their guidance and support as well

as for providing necessary information regarding the thesis.

Lastly, my thanks also go to my family and my classmates for their precious

support which help me completing this thesis.

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TABLE OF CONTENTS

ABSTRACT...........................................................................................................iii

ACKNOWLEDGEMENT......................................................................................iv

LIST OF FIGURES..............................................................................................viii

LIST OF TABLES ...............................................................................................viii

LIST OF APPENDICES ........................................................................................ix

ABBREVIATIONS.................................................................................................x

CHAPTER 1. INTRODUCTION ............................................................................1

1.1. Problem statement......................................................................................1

1.2. Research objectives and hypotheses ...........................................................5

1.3. Scope of study............................................................................................5

1.4. Structure of thesis.......................................................................................6

CHAPTER 2. LITERATURE REVIEW..................................................................7

2.1. Concepts ....................................................................................................7

2.1.1. Total factor productivity (TFP) ............................................................7

2.1.2. Technical change or Technological progress (TP)................................8

2.1.3. Technical efficiency (TE) and Technical efficiency change (TEC) ......8

2.1.4. Scale economies and Scale change effects (SCE).................................9

2.1.5. Allocative efficiency (AE) .................................................................11

2.2. Approaches to measure and decompose TFP growth ................................13

2.2.1. Primal or dual approach with production, cost, or profit function.......13

2.2.2. Stochastic and deterministic approaches ............................................14

2.2.3. Parametric and non-parametric methods ............................................14

2.3. A review of alternative Stochastic Production Frontier (SPF) models.......15

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2.3.1. Time-invariant models.......................................................................16

2.3.2. Time-varying models.........................................................................17

2.3.3. Exogenous inefficiency determinants.................................................19

2.3.4. TFP growth decomposition ................................................................22

CHAPTER 3. OVERVIEW OF VIETNAMESE HIGH-TECHNOLOGY

MANUFACTURING SECTOR ............................................................................25

3.1. High-technology (HT)..............................................................................25

3.2. Overview of Vietnamese HT manufacturing sector ..................................26

CHAPTER 4. METHODOLOGY .........................................................................29

4.1. Empirical models .....................................................................................29

4.2. Functional form........................................................................................30

4.3. Estimation method....................................................................................34

4.4. Hypotheses and testing .............................................................................34

4.5. Variable measurement..............................................................................34

4.5.1. Variables in the frontier model...........................................................35

4.5.2. Determinants of Technical inefficiency..............................................36

4.6. Data source and filter process...................................................................39

CHAPTER 5. EMPIRICAL RESULTS.................................................................40

5.1. Data description .......................................................................................40

5.2. Maximum likelihood estimates.................................................................43

5.3. Results of hypothesis testing.....................................................................47

5.4. Results of TFP decomposition ..................................................................49

CHAPTER 6. CONCLUSIONS ............................................................................54

6.1. Findings ...................................................................................................54

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6.2. Policy implications...................................................................................55

6.3. Limitations and future research ................................................................55

REFERENCES......................................................................................................57

APPENDICES.......................................................................................................64

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