Evidence from Firm-level Data in Vietnam

Yit*⎧ if pitqit+ δEt[V= ⎨⎩0otherwiseq> 0] − δE[ V= 0] ≥ cq ) + N(1− Y*** *1it+1(.)|itt it+1(.)|itit(t,it,it−1|itit−1qXZq)(10)All the above-mentioned details are theoretical backgrounds for the choice of empirical framework thatfollows.II.2. Empirical frameworkEquation (10) is the basis for choosing our empirical framework. There are two ways we may proceed toestimate it. We could either develop a structural representation of this condition by making specificassumptions of the cost function, or choose to employ a non-structural model in testing hypotheses about therole of exogenous factors and firm-specific characteristics that may affect the decision to export of firms. Asstated in Roberts and Tybout (1997), although it is advantageous to use the first approach when it can providea complete description of the dynamic process, it is difficult to do so because of the dynamic dependence ofvariables, especially that of sunk costs. Therefore, we follow herewith the second approach, as many othersdo. Instead of specifying parameters of the cost function to determine the function of profits, we will identifyand quantify the factors that may increase the probability with which a firm is an exporter. The approachemployed in this paper is a binary-choice non-structural one, as stated below:Yit⎧ if γXt+ βZ= ⎨⎩0 otherwise− N(1− Y) + u1itit−1 it≥ 0(11)whereZitis the vector of firm-specific characteristics,X is the vector of exogenous factors, and u istitthe error term. Depending on the purpose of each specification as well as the characteristics and availability ofdata, different elements of Zit , Xt and uitwill be chosen.III. DATA DESCRIPTIONData used in this paper is from Productivity and the Investment Climate Enterprise Survey of Vietnam(Vietnam PICS), conducted by the World Bank with the coordination of Asian Development Bank (ADB) in2005. The source of this data is from Enterprise Surveys, the World Bank Group. Vietnam PICS surveyed1,150 firms in the manufacturing sector of the country, following random sampling methodology. The samplesize is generated with the aim to conduct statistically robust analyses of main estimates with levels ofprecision at a minimum 7.5 per cent precision for 90 per cent confidence intervals. This survey involvesface-to-face interviews with managing directors, accountants, human resource managers and other companystaff, giving a reliable and comprehensive coverage of firm’s characteristics. Although the majority of thequestions in the questionnaire ask for information in 2004, there are questions that are structured on theretrospective basis. This makes it possible for us to construct a panel of data of main variables for the yearsfrom 2002 to 2004. The survey gives us a good data set for doing analysis in this paper, including generalinformation of firms (ownership, establishment year, industry, or location); sales and supplies (direct exportshare, year first exported); labor relations (number of employees or employees’ compensation); or production,8