VIETNAM NATIONAL UNIVERSITY OF AGRICULTURE FACULTY OF ECONOMICS RURAL DEVELOPMENT ••• PROJECT REPORT THE IMPACT OF LABOR PRODUCTIVITY ON VIETNAM’S REAL GROSS DOMESTIC PRODUCT (real GDP) Lecturer Class Student name Student ID Percentage of contribution HANOI 2021 ACKNOWLEDGEMENT Our team, GROUP 1, would like to express our sincere thanks to Dr , the lecturer of Quantitative Analysis for providing us essential skill, knowledge and guidance so that we can complete the project as best we can Our p.
VIETNAM NATIONAL UNIVERSITY OF AGRICULTURE FACULTY OF ECONOMICS & RURAL DEVELOPMENT ••• PROJECT REPORT THE IMPACT OF LABOR PRODUCTIVITY ON VIETNAM’S REAL GROSS DOMESTIC PRODUCT (real GDP) Lecturer: Class: Student name Student ID Percentage of contribution HANOI - 2021 ACKNOWLEDGEMENT Our team, GROUP 1, would like to express our sincere thanks to Dr., the lecturer of Quantitative Analysis for providing us essential skill, knowledge and guidance so that we can complete the project as best we can Our project may not be impeccable and there may be still some small errors but we hope that with our effort in one month of research, we will introduce to everyone a clear overview of labor productivity and its impact on the gross domestic product (GDP) of Vietnam in the last decades TABLE OF CONTENT ACKNOWLEDGEMENT .2 INTRODUCTION Reason for researching Aim of the research 3 Object and range of the research .3 THEORETICAL BASIS .4 Definitions Econometric model Research method .4 Expectation Data source REGRESSION ANALYSIS AND RESULTS .6 Estimate the regression parameters Parameter hypothesis test Measure of fit CONCLUSION Conclusion .8 Recommendation .8 REFERENCE INTRODUCTION Reason for researching As we all know, economic growth is one of the most essential indicators to evaluate the progress of a country or a region Economic growth is closely related to many aspects of the country such as poverty alleviation and hunger eradication, social welfare improvement, national security enhancement… However, when the economy grows too fast and faster than the supply capacity does, it can be lead to overheating That causes some bad effects for the country such as inflation, widening gap between the rich and poor… And this requires the country to have control on its economic growth To know exactly how the economy grows, people often use an indicator called Gross Domestic Product (GDP) in a year or a period If GDP of the following year is higher than the one of the previous years, it means the economy is growing and vice versa Through research, we found that Vietnam’s GDP in the last two decades has changed substantially It has increased year by year, proving that Vietnam’s economy has seen more significant development in comparison with the previous period Such growth and development is due to many factors And we pay special attention to the human factor, in particular, the labor productivity Because it has been proved in reality that labor producivity plays an important part in an economy When the world economy was in crisis, many developed countries oriented to recover their economy through improving labor productivity and it was very successful, Japan is a typical example So what about Vietnam? Does Vietnam’s labor productivity have such strong impact? With the aim of finding the answer to that question, we decide to study the topic: “The impact of labor productivity on Vietnam’s real Gross Domestic Product” Aim of the research Analyze the available data to see the impact of labor productivity on Vietnam’s GDP Object and range of the research Vietnam’s labor productivity and its impact on Vietnam’s GDP from 2005 to 2020 THEORETICAL BASIS “Productivity isn't everything, but in the long run it is almost everything A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.” (Paul Krugman, 1990) (cited “The Age of Diminished Expectations”) Indeed it is Labor productivity is the indicator that reflect the manufacturing capabilities of the labor during manufacturing process, measured by the number of products or the amount of value created in a specified unit of time An increase in labor productivity means an increase of goods and services produced in a specific time period The more goods and services are produced, the larger GDP is Definitions • Gross Domestic Product or GDP: the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period • Labor productivity: the indicator that represents the total volume of output (measured in terms of GDP) produced per unit of labour during a given time reference period Econometric model Population regression model Y = B1 + B2X + u With Y: GDP, dependent variable X: Productivity, independent variable B1: slope B2: intercept u: random error Research method • Data collection: Data from General Statistics Office • Data analysis: - Use Microsoft Excel to analyze data - Build econometric model: Simple linear regression - Parameter estimate with ordinary least squares – OLS method Expectation B2 is positive: When labor productivity increases, GDP increases 5 Data source Data collected from website: www.gso.gov.vn Table of data: Year Labor Productivity GDP (million VND/labor) (Billion VND/year) 2005 21,40 914 001 2006 24,14 061 565 2007 25,30 246 769 2008 32,00 616 047 2009 37,90 809 149 2010 43,93 157 828 2011 55,00 779 880 2012 62,79 245 419 2013 68,26 584 262 2014 74,26 937 856 2015 78,95 192 862 2016 84,41 502 733 2017 93,21 005 975 2018 102,10 542 332 2019 110,45 037 348 2020 117,39 293 145 REGRESSION ANALYSIS AND RESULTS Sample regression function Yi = b1 + b2Xi + ei Estimate the regression parameters Result: • Sample regression function from the result table: Yi = - 277 674,97 + 56 588,01 Xi + ei • Meaning: - b1 = - 277 674,97 means that if labor productivity = then GDP = -277674 billion VND a year - b2 = 56 588,01 means that when labor productivity increase (decrease) million VND per labor, GDP increase (decrease) 56 588,01 billion VND/year Parameter hypothesis test With ∝ • = 0,05 B1: Test the hypothesis H0 : B1 = H1 : B1 ≠ tkd(b1) = b1/se(b1) = -9,206079947 ➔ Conclusion: |tkd(b1)| > tc(5%,14) or 9,206 > 2,145 So: Reject H0, Accept H1 ➔ B1 is statistical significance with ∝ • = 0,05 B2: Test the hypothesis H0 : B1 = H1 : B1 ≠ tkd(b2) = b1/se(b2) = 134,0339532 ➔ Conclusion: |tkd(b2)| > tc(5%,14) or 134,0339532 > 2,145 So: Reject H0, Accept H1 ➔ B2 is statistical significance with ∝ = 0,05 ➔ Economic significance: Labor productivity really have an impact on GDP with ∝ 0,05 Measure of fit From the result table of data analysis, F Distribution value with ∝ Fc(5%,1,14) = 4,60 = 0,05: Test the hypothesis: H0 : R2 = H1 : R2 ≠ Fkđ = 𝐸𝑆𝑆/1 𝑅𝑆𝑆/(𝑛−2) = 17965,1006 Conclusion: Fkđ > Fc(5%,1,14) (17965,1006 > 4,60) ➔ Reject H0, Accept H1 Meaning: The model is statistical significance with ∝ = 0,05 = CONCLUSION Conclusion • Labor productivity really affects Vietnam’s gross domestic product in the perios 2005 – 2020 • The model fits economic hypothesis • Labor productivity explains 99,92% of GDP variation Recommendation To increase GDP, the Government needs to implement policies to increase labor productivity REFERENCES General Statistics Office of Vietnam, ‘Productivity of employed population by industry’, link: https://www.gso.gov.vn/en/px- web/?pxid=E0249&theme=Population%20and%20Employment General Statistics Office of Vietnam, ‘Gross domestic product at current prices by economic sector’, link: https://www.gso.gov.vn/en/pxweb/?pxid=E0302&theme=National%20Accounts%20and%20State%20budget Paul Krugman (1990), The Age of Diminished Expectations, MIT Press