Impact of Trade Liberalisation on Technical Efficiency of Vietnamese Manufacturing Firms

Abstract

This study has examined whether trade liberalisation facilitated manufacturing firms in Vietnam to realise their production potentials fully using firm-level balanced panel data over the period 2000ȓ03. The fi ndings support the theoretical implications of the positive and robust impact of trade liberalisation on firm performance. The study reveals that while more trade liberalisation is conducive to better firm performance, increasing the share of skilled labour is the key for firms to achieve higher potential output in the long-run rather than using more unskilled labour, which is relatively more abundant in Vietnam. The policy implication is that more attention should be paid by policymakers to provide incentives and support for firms to facilitate upgrading the skills of their workers through different means such as on-the-job training.

Trade and Productivity Growth: Evidence From Vietnam’s Manufacturing Sector at Provincial Level

“…On the other hand, Balakrishnan, Pushpangadan and Babu (2000), using a panel data at firm level, conclude that in the post reform period there is no enhancement in Indian manufacturing sectors with respect of productivity growth, but they did not discuss reasons. Chu and Kalirajan (2010), using a balanced panel data of 1,312 Vietnamese manufacturing firms in a period of 2000-2003, find a considerably evidence to support the theoretical literature that trade liberalization has positive effect on firms' performance. Employing stochastic frontier production function as major work-horse, the two researchers estimate the technical change and the effect of Vietnamese government's trade policy at the firm level.…”

“…Lack of concentration on vocational training has brought about the situation that employees do not meet the demand of employers. Chu and Kalirajan (2010) find strong evidence that higher skill labors increase significantly firms technical efficiency. Their finding is an important confirmation for considering the policy aim to improve currently the vocational training system in Vietnam.…”

“…Interestingly, they find a radically result that trade liberalization has put Vietnamese manufacturing firms in front of the challenges and opportunities in the context of market economy. Chu and Kalirajan (2010) suggest that the key policy implication is about training. Vietnamese government should supply more incentives and supports for firms in terms of training their workers and more opportunities for potential workers of manufacturing sector to have suitable skill for meeting the conditions of employers.…”

“…Chu and Kalirajan (2010) served us a useful summary about the linkage between trade liberalization and manufacturing productivity at the firm level in Vietnam. Their paper is the first study in exploring the relation.…”

Technical Efficiency in Transport Manufacturing Firms: Evidence From Malaysia

“…An example of other countries that studied the transportation manufacturing industry includes Alvarez and Crespi (2003), and Chu and Kalirajan (2011) in Chile and Vietnam, which posited that the efficiency of transport manufacturing sector has a significant contribution to the manufacturing industry. This is similar to a study conducted by Karunaratne (2012) in Australia.…”