THE SPILLOVER EFFECTS OF EXPORT ON THE PRODUCTIVITY OF FIRMS IN VIETNAM45332

THE SPILLOVER EFFECTS OF EXPORT ON THE PRODUCTIVITY OF FIRMS IN VIETNAM Nguyen Anh Tuyet"’, Trieu Dinh Phuong? ABSTRACT There have been many quantitative studies relating to the impact of export on productivity in the world Researchers have implemented various methods to measure this relationship The results indicate that not all countries or businesses get the same outcomes from exporting The study focuses on the assessment of the diffuse impact of export on aggregate factor productivity (TFP) of businesses in Vietnam The authors use a strong estimation method of manufacturing functions that combine parameters and semi-parameters of Levinsohn-Petrin for TFP measurements Besides, the authors calculate the diffusion channels of export enterprises Finally, the study estimates the impact of the diffusion of export channels to the enterprise’s TFP The result indicates that while the positive impact of the export enterprises is reflected through a downstream and retrograde link, the effect of specific negative diffusion is shown through the reverse, horizontally diffused channel Keywords: Export, TFP, Levinsohn-Petrin 1, Faculty of Economics and Management, Thuyloi University, Vietnam *Corresponding author: phuongtd@tlu.edu.vn 56 PRODUCTIVITY AND QUALITY IN THE ERA OF DIGITAL TRANSFORMATION INTRODUCTION Export has been regarded as one of the key motivations of an economy, contributing largely to economic development in general and the growth of the business community in particular especially in developing countries for a long time Through export, enterprises rapidly obtain scientific and technological progress, thereby being capable of strengthening their production, enhancing designs, quality, productivity, qualification of employees in production as well as in export and the position and prestige of themselves in the international market Vietnam’s export value had a strong growth in the period 2000-2017 with the average growth rate of 18.1% per year Along with the export development, the structure of the export groups in Vietnam has transited in a positive direction, increasing the proportion of industrial and agricultural products with high quality, decreasing fuel items, minerals, crude production, preliminary preparations, and the productivity between these economic sectors is currently also significant According to the Annual Productivity Institute report 2017, the processing, manufacturing and mining industries gained highly increasing productivity in labor; in the agriculture, forestry and fisheries fields the productivity is low but gradually improving over time However, the contribution of TFP to the growth of the agriculture, fisheries industries is relatively high, in contrast, the mining sector contributes to the growth based solely on capital resulting in a decline in the contribution of TFP and the number of employees So exports really impact the productivity of businesses? How much are the impacts? What are differences in each group of businesses? For this research, the authors would like to clarify the influence of exports to the productivity of the enterprises in Vietnam according to various transport channels International Conference Proceedings 57 THEORETICAL BASIS AND ANALYTICAL FRAMEWORK The authors calculate the aggregate yield factor with the strong estimation method of the production function combining the parameters and semi-parameters of Levinsohn-Petrin for TFP measurements In addition, the authors calculate the diffusion channels of export enterprises Finally, the study estimates impacts of the diffusion of export channels on enterprises TFP To ensure the suitability of the model, the study has performed the successively selected inspection Firstly, the authors check the endogenous phenomenon of the model through: i) Estimating the model by OLS and creating redundancy, ii) Using OLS to estimate the model between residual and independent variables ‘Then there will be appropriate methods to come out If the model does not have an endogenous phenomenon then we use some of the following ways: Breusch - Pagan Lagrangian Inspections (to choose between Pooled OLS and REM), Hausman inspections (to choose between REM and FEM), the Wald inspections (detection of altered variance) and the Wooldridge inspections (self-correlation detection) Besides, the cluster robust model is also used because it can control the phenomenon of changing variance and self-correlation (Judge, Hill et al, 1988) In addition, if there are problems such as endogenous variables, the correlation of the error in the selected model, the FEM or REM model will have problems that result in an estimated and untrusted estimation This problem becomes aggravated in dynamic table models when the delay variables of the dependent variable act as variable explanations in the model Each model will have appropriate estimation methods Dynamic models will have dynamic methods to estimate and the static model will have a static method to estimate 58 PRODUCTIVITY AND QUALITY IN THE ERA OF DIGITAL TRANSFORMATION The model estimates the diffusion of the enterprises participating in exporting to other enterprises The channels that disseminate technology through which an export business can impact the productivity of other businesses built in this research are ways to diffuse technology horizontally and vertically The authors apply an approach to disseminate channels that had been previously mentioned such as: Dermot McAleese and Donogh McDonald (1978) and Sanjaya Lall (1980) initiated the vertical diffusion channel, then Koen Schoors and Bartoldus van de Tol (2002) and Smarzynska Javorcik (2004) distinguished the reverse diffusions and the diffuse-swept Markusen and Anthony J Venables (1999) researched another type of interdisciplinary diffusion impact on this set, which is diffusion retrograde The channels to be constructed are described in detail as follows: e Export diffusions, CVXKit is used to represent the level of presence of a business engaging in exports considered at the time ¢ and is measured as follows: CVXK,, = Xie * dit n j=1 Xit In which, refers to enterprises participating in exports; d,=1 ifiejand d_=0 if i¢j And x refers to the number of businesses in the researched industry X, refers to the assets of the business CVXK., indicates the share of the capital of the exported business in the total capital of the enterprise ¢ The horizontally diffused exporting variable 7XKjtrepresents the level of pesence of enterprises engaging in exports in the j industry at the time ¢ and is measured as follows: HXK;, s = i=1 CVX Kix * Yị, "Vie International Conference Proceedings e 59 The reversed diffused exporting variable BXKjt indicates the possibility of using the ratio of output sold by an enterprise to other export enterprises, which is measured as follows: BXKe =) kif ktj In which, Vite refers Yjne* XK to the output rate of the sector providing sector & at the time ¢ The y is calculated from the time- varying IO table for intermediate consumption In the calculation of y, we exclude a transparent way of intra-industry sales inputs (k ¥ j) Because this amount is represented by HXK, »° Another similarly diffused variable EXK,, is defined as follows: FXK,, = » ôn, * HXKy L nêu L#j The IO table gives us the ratio 6, of the inputs of the sector j purchased from the upstream / Inputsare in theintra- industry (1#j) is also excluded, as this amount has been represented by HXK,, These are the effects of diffusion technology between customers who are non-export and export enterprises providing local intermediate input ° ‘The variable of supply backward (SBXK,) following the assumption of Markusen and Venables is built as follows: SBXK,, = >» Sj * BXKy, Lnêu L#j In which, ổ„ refers to the proportion of inputs from / industry purchased from the upstream industry; while / gives the downstream branches of the exporters to be measured by BXK,, 60 PRODUCTIVITY AND QUALITY IN THE ERA OF DIGITAL TRANSFORMATION Assignment of a model to assess the diffusion impact of the enterprises participating in exports to the productivity of other enterprises PP i, = 6, + 0, vngijt + Ồ, le, +0 ft, + tuoi, 6Lhdn + 0, Vung + ồ„Ngan?, + quymo „hồ, /BXK +,SBXK, ¡g'2ƒornsbip + ồ,„for?sbip + 0, finship + 0, + 0, htnship +ồ + +0 ‘ tu0/2 + ò,„HXK +à,FXK Afornship + ,bfornship + 6,,btnship + 6, sbinship + + 6, fnganhnl + »nganhnl +6, bnganhnl +0 „„bnganbnl +ô ›Jganbkk + 0, pnganhkk + 6, onganhkk + 6, songanhkk + 0, fnganhcb + 6, pnganhcb + 6, „bnganbcb + 6, sbnganhcb +, In which: fp ijt, The productivity of the aggregate factor of business i in industry j at time ¢ giatrixkjjz: The added value from export of business in industry j at time ¢ ung = 1-(voncsh/taisan): A loan from outside tuoi ijt The age of business in industry at time tuoi2.:ijt The average age of business i in industry j at time ¢ lc:ijt The average wage of business / in industry j at time ¢ &í,,: The level of equipment invested into the human head of industry at time ¢ The dummy variable fornship with fornship = if it is a domestic enterprise and fornship = if it is a FDI enterprise The ffornship, hfornship, bfornship, sbfornship are the groups of variables interacting with the fornship dummy variables with the diffusion of the export channels of FXK, HXK, BXK, SBXK The dummy variable tnship with tnship = if it is a private businesse and tnship = if it is not a private business The ffornship, hfornship, bfornship, sbfornship are the groups of variables International Conference Proceedings _ 61 interacting with the fornship dummy variables with the diffusion of the export channels of FXK, HXK, BXK, SBXK The dummy variable nganhnl with nganhnl = if the enterprise is in agro-forestry-fishery industry or nganhnl = it it is in another industry The fnganhnl, hnganhnl, bnganhnl, sbnganhnl are the groups of variables interacting with the nganhnl dummy variables with the diffusion of the export channels of FXK, HXK, BXK, SBXK The dummy variable nganhkk with nganhkk = if the business fnganhkk, hnganhkk, bnganhkk, sbnganhkk are the groups of variables interacting with the nganhkk dummy variables with the diffusion of the export channels of FXK, HXK, BXK, SBXK The dummy variable nganhcb with nganhcb = if the enterprise is in a processing industry or nganhcb = is in a different industry fnganhcb, hnganhcb, bnganhcb, sbnganhcb: The groups of variables interact with nganhcb dummy variables with the diffusion of export channels FXK, HXK, BXK, SBXK Lhdn _* The dummy variable type of business Neanh _* Sectoral dummy variables Vung _* Regional dummy variable Quymo_* Enterprise scale dummy variables METHODOLOGY The data used in this study based on the annual enterprise investigation of General Statistics Office (GSO) of Vietnam in years (2010-2016) of enterprises (including export and non-export enterprises) with the total number of observations of 355,894 These are the data groups after the defective values are processed ‘The labor 62 PRODUCTIVITY AND QUALITY IN THE ERA OF DIGITAL TRANSFORMATION variable (L) is calculated by the number of workers who work for the year The amount of capital (K) and value added (VAT), turnover (DTHU) is calculated by the million VND unit, which is adjusted according to the original deflation index of 1994 Businesses that age, total assets, revenues, non-positive labour are eliminated In this research, the value added (VAT) is used to estimate the productivity of the aggregate factor RESULTS AND DISCUSSIONS Table 1: Statistic description of the variables Variables Capitalism (k) Labor (I) Number of observations 355,894 355,894 Average Standard eae deviation Min Max | 2056876 | 4107346 | 01372992 | TIBE+07 | 98.40683 | 630.4902 85206 i capital 355,894 | 2400954 | 1255489 | 00048426 | 163224.2 Average wage(Ic)| 355894 | 1447/99 | Added value(va) | 355894 | 1468157 | 2525821 | 3.8IE-06 | 6.88E+07 Revenue 355,894 | 20600.81 | 3653443 | 00785145 | 152E+08 Loan Rate (vng) 355,894 | 0.122349 | 0.6598701 | 3.97e-06 | 387.4938 Age of Business | ¡on | 1198775 | 6.87166 1h Square age 355,894 | 198.5382 | 2371052 2B 5⁄76 economic (vung) Region of 355,894 | 5.067256 | 2.544139 Trades (nganh) 355,894 | 0723752 | Business type 355,894 (doanhthu) (tuoi) (tuoi2) (Ihdn) 271.0539 | 00105263 | 8815.22 1285 199458 | 0.2813941 International Conference Proceedings Variables | observa MUmPPrtions o | Average | deviatio Stamortn Proportion of capital to foreign | 355,894 in 63 Max | 0.0001837 | 0.003808 0.7340279 aia amuse | 355,894 | 00057872 | 002485 0.8503089 countries (CVXK) x 355,894 Reverse diffuse / 355,894 | 0.0159408 | 0.027189 | 0.0000472 | 02/6498 a 355,894 | 00748328 | 0082789 | 00000M6 | 048078 supply (SBXK) “own | | 00268322 | 0.038677 | 5.64E-06 | 0.4539074 The resulting economic regression of export enterprises to TFP, the labor productivity of enterprises Table 2: The resulting economic regression of export enterprises to TFP, the labor productivity of enterprises Variables kl Ic vngf tuoi2 tuoi CVXK (1) (2) (3) (4) 0L§ RE FE FE-Robust 2.31e-05*** 9.77e-06*** (5.48e-06) (1.26e-06) (1.7le-06) (4.89e-06) 0.000284*** 0.000236*** 0.000236*** (0.000119) (4.62e-06) (4.72e-06) (7.88e-05) 0.00160*** 0.00151*** 0.000559 0.000559*** (0.000330) (0.000351) (0.000360) (0.000160) -0.00102*** -0.00103"** | -0.000986"* | -0.000986*** 0.000340*** | -2.1/e-09”** | -2.14e-05"* (2.24e-05) (1.21e-05) (1.49e-05) (1.67e-05) 0.0650*** 0.0688*** 0.0703*** 0.0703*** (0.000600) (0.000382) (0.000413) (0.000436) 4.628** 5079 3.489°** 3.489°** 64 PRODUCTIVITY AND QUALITY IN THE ERA OF DIGITAL TRANSFORMATION Variables HXK FXK SBXK BXK ffornship hfornship bfornship sbfornship ftnship htnship btnship sbtnship fnganhcb (1) (2) (3) (4) OLS RE FE FE-Robust (1.096) (0.437) (0.612) (0.768) 0.208 0.0135 -0.333 -0.333* (0.282) (0.263) (0.302) (0.195) 1.414" 106†“° 0.b6b*** 0.565*** (0.152) (0.115) (0.120) (0.112) 7.426" 5.358" 287" 2870 (0.724) (0.405) (0.415) (0.412) 1.194" 0.4677 -0.220** -0.420"* (0.219) (0.172) (0.179) (0.158) 4.00r"* 3.523" 2905 2.963*** (1.039) (0.283) (0.303) (0.607) -1.695** -0.726"* 0.194 0.194 (0.489) (0.305) (0.343) (0.317) 1.967°* 1.8849 1.824" 182415 (0.361) (0.244) (0.256) (0.262) 3.042" 3.837°** ¿00899 ¿868% (1.132) (0.656) (0.671) (0.761) -0.980*** -0.635"** -0.125 -0.125 (0.154) (0.118) (0.122) (0.116) 0.125 0.384 0.595** 0.595*** (0.285) (0.262) (0.293) (0.189) -1.564* -0.405"* 0.790 (0.227) (0.174) (0.182) (0.163) -5.674"* -3.488°* -0.942** -0.942** (0.724) (0.406) (0.417) (0.414) 18078 115999 0.419 0.419 0.7907% International Conference Proceedings Variables hnganhcb bnganhcb sbnganhcb fnganhnl hnganhnl bnganhnl sbnganhnl fnganhkk hnganhkk bnganhkk sbnganhkk nganh Indn2 (1) (2) (3) (4) OLS RE FE FE-Robust (0.331) (0.350) (0.358) (0.290) -0.833 -0.940°* -1.019"* -101979 (0.528) (0.355) (0.447) (0.379) -0.481"* -0.784"* -1.155°** -1.155°* (0.207) (0.198) (0.208) (0.182) 1257mm 6.00T° 5.889*** 5.889*** (0.711) (0.689) (0.704) (0.613) 4.144" 3.017"* 1.775" 1.775" (0.227) (0.215) (0.219) (0.179) -14.63°"* -792% -38.34* -38.34" (1.404) (1.765) (2.347) (2.263) -0.8°% -6.014""* -2.793** -2.193""* (0.467) (0.406) (0.447) (0.363) -1.942""* -0.855* -0.329 -0.329 (0.431) (0.496) (0.507) (0.400) 1.475°* 10949 0.705*** 0.705*** (0.206) (0.183) (0.197) (0.195) -0.397* -0.475*** -0.359** -0.359*** (0.167) (0.129) (0.149) (0.133) 0.951 0.00303 -1.185 -1.185* (0.821) (0.703) (0.731) (0.647) 12519 -1.380679 -1.453°* -1.453°* (0.305) (0.315) (0.312) (0.294) -0.0540*** -0.0316*** -0.0123** -0.0123* (0.00338) (0.00368) (0.00608) (0.00646) 0.72“ 0.0740”% 0.0740”% 0.1809 65 66 PRODUCTIVITY AND QUALITY IN THE ERA OF DIGITAL TRANSFORMATION (1) (2) (3) (4) OLs RE FE FE-Robust (0.0147) (0.00738) (0.00877) (0.0115) 0.1067 0.0705*** -0.06897% -0.06897% (0.00288) (0.00239) (0.00387) (0.00458) 0.0337" 0.0334*"** -0.00309 -0.00309 (0.000812) (0.000766) (0.0123) (0.0159) -0.573"* -0.511""* -0.0185 -0.0185 (0.0293) (0.0160) (0.0654) (0.0838) Observations 355,894 355,894 355,894 355,894 Number of iddn 50,842 50,842 50,842 50,842 Variables quymol vung Constant Notes: ***, ** and * indicate statistical significance at 1%, 5% and 10% The diffusing impact of the businesses participating in exporting to TFP businesses The results suggest that CVXK, FXK, SBXK, BXK _ have statistical significance at 1% and at 10% for the HXK variable Firstly, assessing the impact of enterprises participating in exporting to the productivity of the aggregate factor of manufacturing enterprises requires an evaluation of the participation of these businesses into other enterprises The CVXK coefficient represents the share of the capital of the businesses engaged in exports to the total capital of the enterprises bearing positive and statistically significant at a meaningful level of 1% This result implies that the exporting businesses have created a positive effect on the enterprises’ TFP in Vietnam International Conference Proceedings 67 Secondly, the coefficient of the variable HXK has a negative mark and is statistically significant at a meaningful level of 10% in the model In addition, when businesses are engaged in exports, highly skilled and experienced workers in other businesses move to these businesses because they are more attractive and therefore leading to brain drain This impairs the TFP of domestic enterprises because businesses participating in export pay more so they can easily attract the workers from other businesses In addition, the Vietnamese government has also used income tax incentive as a way to stimulate enterprises to enhance their export capacity causing negative effects on other businesses’ competitiveness, market share and therefore having resulted in the reduction of the productivity of these businesses Thirdly, the positive FXK coefficient has highly statistical significance (1% in the model) This indicates a downward spillover from an export business with a positive impact on the downward linkage to other companies Production inputs from exporters will also help businesses own high-quality products and services which consequently helps increase the efficiency of these businesses Fourthly, reverse linkage (BXK) indicates the businesses that offer inputs for export businesses will have a decline in their TFP When exporters buy input from local suppliers, they will transfer the knowledge, technology, and experience learned from exporting to domestic suppliers and therefore encouraging the diffusion of this technology upstream to break the stagnation of production However, not all businesses can receive these effects, which lead to keen competition that decreases the productivity of the businesses, reducing demand for businesses that not have the ability to absorb Fifthly, the coefficient of the SBXK variable is positive and statistically significant Domestic suppliers need to improve the 68 PRODUCTIVITY AND QUALITY IN THE ERA OF DIGITAL TRANSFORMATION quality of their products to meet high requirements from exporters which promotes domestic suppliers to invest and produce products with higher quality These domestic suppliers also provide inputs for other businesses in the country which in turn can create positive spillover on domestic enterprises Sixthly, considering the impact of diffuse interactions by the different types of enterprises including FDIs and private enterprises, the results show that while the impact of downstream, upstream and backward diffusions from FDI enterprises on TFP is better than the others, the horizontal diffusion from private enterprises is greater Lastly, considering the diffuse impacts in terms of the industry, the results indicate that the diffusion in agriculture, forestry and mining industries has impact better on TFP’s than businesses in other industries Horizontal and backward diffusions in the current groups to TFP of businesses are rather poor Finally, the backward diffusion in the processing industry has the greatest impact on TFP CONCLUSION The research results show that exports have positive effect on the productivity of businesses in Vietnam Therefore, the Vietnamese government should have the appropriate orientations to promote exports so as to improve the productivity of enterprises and the channels of reverse and horizontal diffusion which will help to enhance the position of the country in the international market Businesses should have strategies to make human resource become a dynamic factor through developing labor force with quality, discipline and high productivity Last but not least, the capital also needs to be used reasonably to improve the productive efficiency International Conference Proceedings REFERENCES Battese & Coelli, TJ (1995), “A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data,” Empirical Economics 20, 325-332; Dermot McAleese & Donogh McDonald (1978), “Employment growth and the development of linkages in foreign-owned and domestic manufacturing enterprises”, Oxford Bulletin of Economics and Statistic 40 (4): 321-329 Koen Schoors & Bartoldus van de Tol (2002), “Foreign Direct Investment Spillovers within and between Sectors: Evidence from Hungarian Data”, Ghent University Faculty of Econmics and Business Administration Ghent University Working Paper, 02/157.2002 Levinsohn, James & Petrin, Amil (2003), “Estimating Production Functions Using Inputs to Control for Unobservables”, Review of Economic Studies, 70 (2), pp 317-41 Markusen & AnthonyJ Venables (1999), “Foreign direct investment as a catalyst for Industrial development”, European Economic Review, 43(2), pp 335-356 Sanjaya Lall (1980), “Vertical Interfirm Linkages in LDCs: An Empirical Study”, Oxford Bulletin of Economics and statistics, 42(3), pp 203 -226 Smarzynska Javorcik (2004), “Does Foreign Direct Investment increase the Productivity of Domestic Firms? In Search of Spillovers through Backward Linkages”, American Economic Review, 94 (3), pp 605-627  ... assessing the impact of enterprises participating in exporting to the productivity of the aggregate factor of manufacturing enterprises requires an evaluation of the participation of these businesses... CVXK., indicates the share of the capital of the exported business in the total capital of the enterprise ¢ The horizontally diffused exporting variable 7XKjtrepresents the level of pesence of enterprises... the contribution of TFP to the growth of the agriculture, fisheries industries is relatively high, in contrast, the mining sector contributes to the growth based solely on capital resulting in