Evidence from Firm-level Data in Vietnam

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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
expenses and assets.Table 1: SAMPLE NUMBERS OF EXPORTERS AND NON-EXPORTERS IN INDUSTRIESIndustriesTotalNumber offirmsNon-exportersExportersExportershare (%)Food and Beverage 182 103 79 43.41Textiles 69 25 44 63.77Garments 7018 52 74.28Leather Products 22 4 18 81.82Wood and Wood Products 134 79 55 41.04Paper 59 51 8 13.56Chemical & Chemical Products 58 47 11 18.97Rubber, Plastic and Non-metallic Products64 46 18 28.12Metals and Metal Products116 102 14 12.07Machinery, Equipment and Electrical Products 58 44 14 24.14Electronics 19 13 6 31.57Construction Materials87 72 15 17.24Others 119 96 23 19.33Total 1057 700 357 33.77Source:Author’s calculation from the data set.The sample is about 5.6 per cent of 20.5 thousands manufacturing firms in Vietnam in 2004 [GSO(2005)]. After controlling for missing data and outliers, the remaining size of the sample is about 90 per centof the original one. This is a reasonable drop rate in a micro survey data. In this data set, exporters (defined asfirms that directly export at least 10 per cent of their sales) account for about 34 per cent of the firms in 2004.There are exporting firms in all the industries, in which industries of food and beverage, textiles, garments,leather products, and wood and wood products show high shares of number of exporters (see Table 1).Although export status is not a criterion for choosing the sample, this is close to the real state of thepopulation of firms in Vietnam. According to a complete survey of enterprises in Vietnam in 1998, thenumber of manufacturing firms that exported in 1998 is 32.3 per cent of the total firms in the sector, with veryhigh shares of industries of food and beverage, textiles, garments, leather and wood [GSO (1998)]. In thesurvey of firms in 30 Northern provinces in 2005, 40.8 per cent of firms who responded to the survey reporthaving exporting potentials [SME TAC (2005)]. It is not always possible to realize these potentials. Hence,the share of exporters must be somewhat below this figure. Therefore, it is also appropriate to use this samplefor analyzing exporting behaviors of firms in Vietnam.9
Page 1 and 2: ENTRY COSTS AND HETEROGENEOUS CHARA
Page 3 and 4: certainly different among firms. Th
Page 5 and 6: towards more productive firms. Firm
Page 7: In the framework of multiple period
Page 11 and 12: variable when there is the phenomen
Page 13 and 14: are vectors of parameters; andvitis
Page 15 and 16: that determines export status and p
Page 17 and 18: combine Rubbe r and Plastic Product
Page 19 and 20: on the analysis of the direction of
Page 21 and 22: Besides TFP, we also use labor prod
Page 23 and 24: an important factor that guides fir
Page 25 and 26: APPENDIX(1) Estimation of total fac
Page 27 and 28: Table A.1:COEFFICIENTS OF PRODUCTIO
Page 29 and 30: (0.3254) (0.4484) (0.6159) (0.3229)
Page 31 and 32: Falvey, R., D. Greenaway and Z. Yu,

Evidence from Firm-level Data in Vietnam

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