Agglomeration Effects: Productivity of the Informal Sector in Vietnam

Informal Sector and Urbanization Externalities in Vietnam

“…Vietnamese informal businesses and workers tend to concentrate in high economic growth cities (Cling et al2010). Similarly, Tran and La (2018) find that informal household businesses in Vietnam tend to cluster in the most highly developed cities including metropolitan areas, centrally-managed cities, and emerging industrial provinces. 1 In addition, the informal sector concentrates in five labor-intensive industries including: food processing, wearing apparel, fabricated metal products, furniture, and wood and wood products.…”

“…As shown in Tran and La (2018), informal household businesses tend to locate in areas which have the high concentration of formal firms. This paper, therefore, examines the impacts of formal firm clustering on LP of IHBs.…”

“…The paper, therefore, separates these impacts from urbanization by capturing the effects of supplier linkages and market access on LP of IHBs in urban places of Vietnam. As in Tran and La (2018), supplier linkages are measured as the strength of connection to suppliers and market access measured the importance of market accessibility that an informal firm could have in its surrounding locations (see Tran and La (2018) for more details about the calculation of these variables). Table 1 provides the level and sources of variables while Table 2 presents descriptive statistics of variables used in the analysis.…”

“…In a recent study on the effects of agglomeration economies on the labor productivity of informal household businesses in Vietnam, Tran and La (2018) find that technology transfers are not an agglomerative force for the informal sector in Vietnam. This is because informal firms have low human capital and thus they might not learn from each other.…”

“…On the other hand, the concentration of the sector in big cities and urban places creates urban costs and destroys the income of urban dwellers (Haughton, 2010;Cling et al 2010). Nevertheless, Vietnamese informal businesses and workers concentrate in high economic growth cities (Cling et al 2010;Tran and La, 2018).…”