The imfact of transaction cost on competitiveness level, case study in vietnam at the provincial level

UNIVERSITY OF INSTITUTE OF SOCIAL STUDIES ECONOMICS HO CHI THE HAGUE MINH CITY THE NETHERLANDS VIET NAM THE VIETNAM - THE NETHERLANDS PROJECT FOR M.A PROGRAM IN DEVELOPMENT ECONOMICS THE IMPACT OF TRANSACTION COST ON COMPETITIVENESS LEVEL, CASE STUDY IN VIETNAM AT THE PROVINCIAL LEVEL BO G I A0 DUC DAOi A0 By BUI QUANG HUY A thesis submitted in partial fulfillment of the requirements for the degree of MASTER OF ARTS IN ECONOMICS OF DEVELOPMENT ACAMEDIC SUPERVISOR: DR NGUYEN TRONG HOAI HO CHI MINH CITY, APRIL 2008 CERTIFICATION “I certify that the substance of this thesis has not already been submitted for any degree and is not being currently submitted for any other degree I certify that to the best of my knowledge and help received in preparing this thesis and all sources used, have been acknowledged in this thesis” Signature BUI QUANG HUY Date: April 2008 I ACKNOWLEDGMENTS This thesis is a very significant in my life And this thesis would not have been finished without the best helps and supports from many people So, I wish to express my acknowledgments to them Firstly, I would like to express my acknowledgment and thank to my academic supervisor, Dr Nguyen Trong Hoai, for his guidance and comments through my thesis writing period His scientific instructions make my thesis become more clearly and concise I sincerely thank Mr Nguyen Duy Khanh, who has provided me to have the data sei of GDP of The General Statistics Office; and Mr Nguyen Anh Tuan — the expert of the VCCI & VNCI for giving me help in the statistical and calculation issues of the PCI data for my thesis I am very grateful to my teachers and staff in Vietnam - Netherlands Project, Mr Dao Xuan Due — my leader and friends of mine for their help and friendship • And finally, as for my family, specially my wife, I can not thank them enough for their unconditional support and love They has encouraged and supported me in during this program Ho Chi Minh City, April 2008 II ABSTRACT The Transaction cost & Competitiveness include multidimensional feature of an economic entity operating in a market economy In this thesis, therefore, different aspects of them can be explored The meaning of Transaction cost & Competitiveness for different economic entities will be determined and their relationship will be shown on the provincial level The major determinanis of Transaction cost are presented And, the main objectives of the thesis are firstly, to build a measurement regression model of the Competitiveness level basing on data which is collected from some resources (The VNCI & VCCI (2005-2006); General Statistics Office); and then to use that model to evaluate the impact of transaction cost on the Competitiveness level From which, some important policies can be given so that the transaction cost can be reduced and the provincial competitiveness in Vietnam can be increased remarkably III LIST OF ABBREVIATION Co Competitiveness GDP/head or capita ' TC Transaction cost HK Human Capital QI Quality of Infrastructure PM Gross Domestic Product per head or capita Proximity to Market EC Entry cost IC Informal charges Tc Time cost of regulatory compliance TAI Transparency and access to Information PSD Pro-activity of Provincial Leadership X ' Time of researching The VNCI & VCCI The Vietnam Competitiveness Initiative & Vietnam Chamber of Commerce and Industry MICI Microeconomic Competitiveness Index PIB Produit Interieur Brut (meaning GDP/head) SWF social welfare function OLS Ordinary Last Square i VND Vietnamese dong 'o Percent TABLE OF CONTENTS CHAPTER 1: INTRODUCTION .1 1.1 Problem statement 1.2 Research objectives .2 1.3 Research questions: .2 1.4 Research hypotheses: • 1.5 Research methodology: .3 1.6 Research limitation: CHAPTER 2: LITERATURE REVIEW Definitions 2.1.2 Transaction costs 2.2 Theoretical backgrounds 2.2 The competitiveness model 10 2.2.2 Transaction cost model 14 2.2.3 Human capital, Quality of Infrastructure and Proximity to market: 17 2.3 Empirical studies 19 2.3.1 Dale B Thompson (1998) 19 2.3.2 Ning Wang (2003) 25 2.3.3 J Luis Guasch & Alvaro Escribano (2005) 26 2.3.4 World Bank (2006) 28 2.3.5 Empirical study of the USAID-funded Vietnam Competitiveness Initiative (VNCI) and the Vietnam Chamber of Commerce and Industry (VCCI) (20052006) 31 2.4 Chapter Remarks .31 CHAPTER 3: DATA AND ECONOMETRIC MODEL FINDINGS 34 The Econometric Design 34 3.2 The Definition of variables 35 3.2.1 Dependent Variable (Competitiveness) 35 3.2.2 Independent variable 35 3.2.3 Model specification 38 3.3 Data collection method 39 3.3.1 Competitiveness 40 3.3.2 The determinants of Transaction costs on the Provincial Competitiveness 40 3.3.3 Variable analysis 40 3.4 Main hypothesis: 46 3.5 Estimation of result by regression equation 46 3.6 Explanation of coefficient 48 3.7 Chapter remarks .54 CHAPTER 4: CONCLUSIONS AND POLICY IMPLICATIONS .56 * 4.1 Conclusions .56 4.2 Policy implications 57 REFERENCES 60 VI APPENDIX 66 APPENDIX2 70 APPENDIX .73 - APPENDIX .74 VII LIST OF TABLES Table 2.1: Checklist for the Institutional Transaction Costs Framework 22 Table 2.2: Some Important Types of Transaction Costs 28 - Table 2.3: Transactions Cost Related to the Legal and Regulatory Environment 29 Table 3.1: Variable summary 39 - Table 3.2: Descriptive statistics of ratio difference of the variable between 2005-2006 41 Table 3.3: The detail result of Provincial Competitiveness Sub-Indices in • 2005 43 , Table 3.4: The detail result of Provincial Competitiveness Sub-Indices in 2006 44 Table 3.5: The results of regression 47 Table 3.6: The results of restricted regression .50 VIII CHAPTER 1: INTRODUCTION 1.1 Problem statement In recent years, globalization has brought new opportunity as well as challenges to both policy makers and enterprises of Vietnam In the context of globalization, regional and international organizations have been established, growing and setting new standards to influence business activities and various sectors It means that the competitiveness improvement becomes one of most important issue in the economy So, what is competitiveness? And, why does competitiveness have important role in economy? According to the Reports of the National Council for Competitiveness and Development (2006); Competitiveness, as the ability to maintain and improve the standards of living in a country, advance the business environment, strengthen employment, cohesion, environmental protection, and to constantly upgrade productivity and increase market shares in a globalize context Thus, when Vietnam becomes a member of WTO, competitiveness is the key to the further economic success Recently, Vietnam’s Government focuses on efficiency to enhance the national competitiveness of Vietnam as well as provinces That is why more and more Vietnam has become an attractive destination for foreign investors However, investors still complain about complicated procedures (vietnamnet.vn (2006)) It is because they have to spend a lot of times and costs for overlapping law, regulation, and bureaucratic official staff And, they have to lose a lot of transaction cost betore they get anything So, what is transaction cost? How is its role in modern social? And whether a reduction in transaction cost and an increase in competitiveness is a really urgeni demand? Matthews, R.C (1986) “The economics of institutions and the source of growth.” Economic Journal 96:pp 903-918 Nguyen Hiep & Hiroshi (2007) “The role of entry costs and heterogeneous characteristics of firms in the decision to export” http://www.research.kobe-u.ac.jp/gsics-publication/gwps/2007-17.pdf Nguyen Trong Hoai (2007) “Review — Heteroskedasticity” The Fulbright Economics Teaching Program, Autumn term 4/9/2007-23/12/2007 Porter, M (1990) “The Competitive Advantage of Nations” (The Free Press, New York, A Division of Macmillan 1990), pp 885 Porter, M (1998) “The microeconomic foundations of economic development” in Global Competitiveness Report, Geneva: World Economic Forum, 1998 Ramu Ramanathan (2002) “Introductory econometrics with application” th ed, Fort Worth: Harcourt College Publishers: Chapter 8, pp 344-367 Rodrik, Dani (2000) “Institutions for high-quality growth: what they are and how to acquire them.” NBER Working Paper 7540 Stoll, Hans and Robert Whaley (1983) “Transaction costs and the small firm effect.” Journal of Financial Economics 12:pp 57-79 The Competitiveness Institute (2007) “The cluster practitioners network” http://www.competitiveness.org/article/artic1eview/774, 15 — Nov — 2007 The Competitiveness of nations (2004) “Economic Growth in the ECE Region” http://www.unece.org/ead/sem/sem2004/papers/Fagerberg pdf The Free Dictionary (2007) “Financial dictionary — Transaction cost” http://encyclopedia.thefreedictionary.com/transaction+cost 62 global development finance report (2006) http://pgpblog.worldbank.org/node?page=25 International Institute for Management Development (IMD), The World Competitiveness Yearbook http://www.imd.ch/research/centers/wcc/research_methodo1ogy cfm The National Competitiveness Council (2007), “Annual Competitiveness Report 2001 ” http://www.forfas.ie/ncc/reports/ncc_annual_01/approach.htmtt2 The Reports of the National Council for Competitiveness and Development.(2006) “The 2005 competitiveness report, executive summary” http://www.goog1e.com.vn/search?h1=vi&q=9 o22abi1ity+to+maintain+an d+improve+the+standards+of+living+in+a+country9 o22&meta= Role of Intellectual Property System in the use of ICTs by SMEs (2001) http://www.wipo.int/sine/en/documents/pdf/codi_2 pdf • The socio-economic & enviromental research institute (2002) “Economic briefing to the Penang State Government” http://www.seri.com.my/oldsite/EconBrief/EconBrief2002-08.PDF The The Vietnamnet.vn (2006) “Prices in 2007: up or down?” http://english.vietnamnet.vn/biz/2007/01/651517/ Vietnamnet.vn (2006) “Thii tuc phién ha, hanh doanh nghiep” http://www vietnamnet vn/psks/2006/11/632027/, 10 — Nov — 2006 The VNCI & VCCI (2005, 2006) “The Vietnam Provincial Competitiveness Index Economic Governance for — Measuring Private Development” http://www pcivietnam.org/ 63 Sector The World Bank (2002) World Development Report 2002: Building Institutions for Markets New York: Oxford University Press for the World Bank The World Bank (2006) “A transactions cost approach to evaluating the environment for business - Assessing transactions costs: world bank experience” http://www.worldbank.org/urban/local/toolkit/docs/ml/lm/module-1-1m2.pdf Thompson, Dale B (1998) The Institutional Transaction Cost Framework for Public Policy Analysis http://papers.ssrn.com/sol3/papers.cfm?abstract_id=80308 Trabold, H Die Internationale Wettbewerbsffhigkeit einer Voppswirtschaft Deutsches Institut Wirtschaftsforschung fr Wirtschaftsforschung Vierteljahrshefte zur 2/1995 (Schwerpunktheft Wettbewerbsfhigkeit), Dunker&Humblot: Berlin, pp 169 — 183 Wallis, John Joseph and Douglass C North (1987) “Measuring the transaction sector in the American economy, Internationale 1870-1970,” with a Comment by Lance Davis In Long-Term Factors in American Economic Growth, edited by Stanley L Engerman and Robert E Gallman University of Chicago Press.pp 121 Wang, N (2003) “Measuring Transaction Costs: An Incomplete Survey” http://www.coase.org/w-wang2003measuringtransaction costs.pdf Williamson, Oliver (1975), Markets and Hierarchies, New York, Free Press Williamson, Oliver (1985) The Economic Institutions of Capitalism New York: Free Press 64 Williamson, Oliver (1996) The Mechanism of Governance New York: Oxford University Press Williamson, Oliver (1998) “Transaction cost economics: how it works; where it is headed.” De Economist 146 (1):pp 23-58 Williamson, Oliver (2000) “The New Institutional Economics: taking stock, looking ahead.” Journal of Economic Literature 38 (3):pp 595-613 65 APPENDIX I Table Appendix 1.1: The results of unrestricted regression Dependent Variable: LOG(CO) Method: Least Squares Date: 05/01/08 Time: 23: 16 Sample: 84 Included observations: 84 Variable Coefficient C LOG(HK) LOG(QI) LOG(PM) LOG(EC) LOG(TAI) LOG(TC) LOG(IC) LOG(PSD) X R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood Durbin-Watson stat 12.49500 133387 0.945166 0.428339 -0.161014 0.087189 0.488331 -0.043971 0.360990 0.354505 0.618495 0.572096 0.404294 12.09555 -37.79569 1.992919 Std Error t-Statistic Prob 0.811908 0.090620 123010 0.092971 0.314218 0.235856 0.264163 0.266694 0.147934 0.154154 15.38969 1.471938 7.683640 4.607244 -0.512428 0.369672 1.848594 -0 164876 2.440210 2.299687 0.0000 1453 0.0000 0.0000 0.6099 0.7127 0.0685 0.8695 0.0171 0.0243 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic) 16.02424 0.618050 137993 1.427376 13.32987 0.000000 Source.- Author’s calculation Estimation Command: LS LOG(CO) C LOG(HK) LOG(QI) LOG(PM) LOG(EC) LOG(TAI) LOG(TC) LOG(IC) LOG(PSD) X Estimation Equation: LOG(CO) = C(1) + C(2)*LOG(HK) + C(3)*LOG(QI) + C(4)*LOG(PM) + C(5)*LOG(EC) + C(6)*LOG(TAI) + C(7)*LOG(TC) + C(8)*LOG(IC) + C(9)*LOG(PSD) + C(10)*X 66 The results of the unrestricted model: LOG(CO)= 12.49 + 13353*LOG(HK) + 0.945 *LOG(QI) + (0.b1) IO.(l9) (ID 2) 0.428*LOG(PM) - 161*LOG(EC) + 0.087*LOG(TAI) + 0.488*LOG(TC) - 0.043*LOG(IC) + 0.36*LOG(PSD) + 0.354*X Table Appendix 1.2: The results of White Heteroskedasticity Test of unrestricted regression White Heteroskedasticity Test: F-statistic Obs*R-squared 0.507666 39.71666 Probability Probability 0.984695 0.911630 Test Equation: Dependent Variable: RESID°2 Method: Least Squares Date: 05/06/08 Time: 15:32 Sample: 84 Included observations: 84 Variable , C LOG(HK) (LOG(HK))°2 (LOG(HK))*(LOG(QI)) (LOG(HK))*(LOG(PM)) (LOG(HK))*(LOG(EC)) (LOG(HK))*(LOG(TAI)) (LOG(HK))*(LOG(TC)) (LOG(HK))*(LOG(IC)) (LOG(HK))*(LOG(PSD)) (LOG(HK))*X LOG(QI) (LOG(Q1))°2 (LOG(QI))*(LOG(PM)) (LOG(QI))*(LOG(EC)) (LOG(QI))*(LOG(TAI)) (LOG(QI))*(LOG(TC)) (LOG(QI))*(LOG(IC)) (LOG(QI))*(LOG(PSD)) (LOG(QI))*X LOG(PM) (LOG(PM))°2 Coefficient -39.15445 129670 0.015240 -0.287785 0.074185 0.230741 -2.394338 -0.557903 1.556243 0.838453 6.40E-05 1.320855 -0.246370 0.512436 -0.662161 -1.873519 -0.500770 0.738801 1.599559 0.516600 133674 1.197407 67 Std Error t-Statistic Prob 41.38890 9.834649 0.487837 1.640736 1.537200 2.539894 1.780659 115688 1.98l821 1.595442 1.140911 9.667428 0.704611 1.172478 2.851159 2.695933 118514 2.320452 1.963242 1.297315 5.800167 0.592453 -0.946013 0.013185 0.031240 -0 175400 0.048260 0.090847 - 1.344636 -0.263698 0.785259 0.5255 31 5.61E-05 136629 -0.349654 0.437053 -0.232243 -0.694943 -0 160580 0.318387 0.814754 0.398207 0.367864 2.021099 0.3517 0.9896 0.9753 0.8619 0.9618 0.9282 0.1888 0.7938 0.4385 0.6031 1.0000 0.8922 0.7290 0.6652 0.8179 0.4924 0.8735 0.7524 0.4216 0.6933 0.7 156 0.0523 • ’ _ - • (LOG(PM))*(LOG(EC)) (LOG(PM))*(LOG(TAI)) (LOG(PM))*(LOG(TC)) (LOG(PM))*(LOG(IC)) (LOG(PM))*(LOG(PSD)) (LOG(PM))*X LOG(EC) (LOG(EC))°2 (LOG(EC))*(LOG(TAI)) (LOG(EC))*(LOG(TC)) (LOG(EC))*(LOG(IC)) (LOG(EC))*(LOG(PSD)) (LOG(EC))*X LOG(TAI) (LOG(TAI))º2 (LOG(TAI))*(LOG(TC)) (LOG(TAI))*(LOG(IC)) (LOG(TAI))*(LOG(PSD)) (LOG(TAI))*X LOG(TC) (LOG(TC))º2 (LOG(TC))*(LOGI IC)) (LOG(TC))*(LOG(PSD)) (LOG(TC))*X LOG(IC) (LOG(IC))°2 (LOG(IC))*(LOG(PSD)) (LOG(IC))*X LOG(PSD) (LOG(PSD))º2 (LOG(PSD))*X X R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood Durbin-Watson stat -4.963957 -0.960045 0.010783 1.737165 0.958294 1.033532 19.07737 -5.853470 1.665233 3.970985 0.960562 -0.397463 4.802703 18.55442 -2.297237 -2.506984 -1.315651 0.485746 -1.115204 4.385333 -0.221018 -5.108656 1.429709 1.903215 8.485859 -1.682355 -0.258165 -2.606557 -5.404122 -0.780132 1.081823 -10.50998 0.472817 -0.458539 0.727571 15.88080 -49.23119 114408 2.846282 -1.744014 2.015884 2.540879 2.d4l900 1.155515 1.426917 20.40192 6.846856 7.535724 7.559691 6.226168 3.644189 4.603927 20.02476 2.896337 5.588357 3.817668 3.674653 2.803581 21.83881 3.687237 6.571859 3.406306 4.119573 18.77040 3.750825 4.451817 3.573717 15.57557 1.137696 2.637100 10.27400 -0.476240 0.004244 0.657544 0.829322 0.724311 0.935077 -0.854914 0.220978 0.525284 0.154278 -0.109068 1.043175 0.926574 -0.793153 -0.448608 -0.344622 0.132188 -0.397778 0.200805 -0.059941 -0.777353 0.419724 0.461993 0.452087 -0.448529 -0.057991 -0.729369 -0.346961 -0.685712 0.410232 -1.022969 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic) Sourc’e.- Author’s c’alculation 68 0.0914 0.6374 0.9966 0.5158 0.4135 0.47+5 0.3572 0.3994 0.8266 0.6032 0.8784 0.9139 0.3052 0.3615 0.4339 0.6569 0.7328 0.8957 0.6936 0.8422 0.9526 0.4430 0.6777 0.6474 0.6545 0.6570 0.9541 0.4714 0.7310 0.4982 0.6846 0.3145 143995 0.d02444 2.457885 4.020553 0.507666 0.984695 Hypothesis Hi: ‹z = ‹z ,.' ×54= Hypothesis H : At least ‹z ; (k = 2; 54) nR'= 84*0.472817= 39.71666 and p-value = 0.911630 > 10Ro leading to Maintain @ It means that there is no heteroscedasticity in unrestricted model (Nguyen Trong Hoai (2007)) Table Appendix 1.3: The results of multicollinearity Test of unrestricted regression - Unrestriced model HK QI PM EC TAI TC IC PSD R„ ' VIF=1/(1- R„ ') 166425 1.199652 184588 1.226374 0.085345 1.093308 0.441841 1.791604 0.403008 1.675064 0.531889 136245 118037 1.133834 0.319345 1.469173 1/VIF 0.833575 0.815412 0.914655 0.558159 0.596992 0.468111 0.881963 0.680655 S‹›urce Author’s calculation Table Appendix 1.3 show that Rig ' < Ru' 618495) and, thus Variance — Inflation Factor (VIF) is used to test the problem of multicollinearity VIF = All calculated VIF is smaller than 10, and it means that there is no multicollinearity arising in the unrestricted model (Gujarati, 1995) 69 APPENDIX Table Appendix 2.1: The results of restricted regression Dependent Variable: LOG(CO) Method: Least Squares Date: 05/02/08 Time: 13:16 Sample: 84 Included observations: 84 Variable C LOG(QI) LOG(PM) LOG(TC) LOG(PSD) x R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood Durbin-Watson stat Coefficient Std Error 12.36768 0.950085 0.410052 0.610070 0.312177 0.376007 0.604688 0.579347 0.400854 12.53332 -39.28894 2.017177 0.505713 113284 0.089294 0.241981 0.123717 117817 t-Statistic Prob 24.45593 8.386782 4.592166 2.521153 2.523317 3.191458 0.0000 0.0000 0.0000 0.0137 0.0137 0.0020 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-statistic) 16.02424 0.618050 1.078308 1.251938 23.86247 0.000000 Source.• Author’s calculation Estimation Command: LS LOG(CO) C LOG(QI) LOG(PM) LOG(TC) LOG(PSD) X Estimation Equation: LOG(CO) = C(1) + C(2)*LOG QI) + C(3)*LOG(PM) + C(4)*LOG(TC) + C(5)*LOG(PSD) + C(6)*X The results of the restricted model: LOG(CO)= 12.367 + (0.505) 0.61*LOG(TC) (0.241) 0.95*LOG(QI) (CI 113) + 0.41*LOG(PM) + (().0119) 0.312*LOG(PSD) + 0.376*X (0 123) 70 (0 17) Table Appendix 2.2: The results of White Heteroskedasticity Test of restricted regression White Heteroskedasticity Test: 0.690672 14.29296 F-statistic Obs*R—squared 0.814249 0.766353 Probability Probability Test Equation: Dependent Variable: RESID°2 Method: Least Squares Date: 05/18/08 Time: 16:21 Sample: 84 Included observations: 84 Variable C LOG(QI) (LOG(QI))"2 , (LOG(QI))*(LOG(PM)) (LOG(QI))*(LOG(TC)) (LOG(QI))*(LOG(PSD)) ’(LOG(QI))*X LOG(PM) (LOG(PM))°2 (LOG(PM)) *(LOG(TC)) (LOG(PM))*(LOG(PSD)) (LOG(PM))*X LOG(TC) (LOG(TC))°2 (LOG(TC))*(LOG(PSD)) (LOG(TC))*X LOG(PSD) (LOG(PSD))º2 (LOG(PSD))*X x - R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood Durbin-Watson stat - Std Error t-Statistic Prob 3.018684 -0.178860 -0.046826 0.085594 0.292834 -0.066816 0.064101 -3.575549 0.550268 0.897373 0.327240 0.272560 -1.778299 0.280086 -0.666933 0.625970 1.606543 -0.351935 -0.223380 -1.165060 7.037764 3.404686 0.307376 0.606259 1.548788 0.975301 0.548784 2.269121 0.264839 1.243614 0.595081 0.454118 6.042098 1.856066 1.349287 1.465648 3.010653 0.429159 0.732698 2.262385 0.428927 -0.052533 -0.152341 0.141185 0.189073 -0.068508 0.116806 -1.575742 2.077746 0.721585 0.549908 0.600198 -0.294318 0.150903 -0.494286 0.427094 0.533619 -0.820057 -0.304874 -0.514970 0.6694 0.9583 0.8794 0.8882 0.8506 0.9456 0.9074 1200 0.0417 0.4732 0.5843 0.5505 0.7695 0.8805 0.6228 0.6707 0.5955 0.4152 0.7615 0.6083 170154 -0.076206 0.643006 26.46124 -70.67513 2.027753 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion F-statistic Prob(F-sta tistic) Coefficient Source.- Aidhor’s calculation Hypothesis Hi: o, = o, = o =0 Hypothesis H : At least ‹z k (k = 2; 20) 71 149206 0.619823 158932 2.737698 0.690672 0.814249 nR'= 84*0.170154= 14.29296 and p-value = 0.766353N 10Ro leading to Maintain Hi It means that there is no heteroscedasticity in restricted model (Nguyen Trong Hoai (2007)) Table Appendix 2.3: The results of multicollinearity Test of restricted regression Restriced model QI PM TC PSD R„ ' VIF=1/(1- R;,') 0.054845 1.058028 0.025265 1.02592 0.451585 1.823437 0.043284 1.045242 1/VIF 0.945155 0.974735 0.548415 0.956716 Source.- Author’s calculation Table Appendix 2.3 show that • R,j ' < Ru' 604688) and, thus Variance — Inflation Factor (VIF) is used to test the problem of multicollinearity VIF (1 - r ,² ) All calculated VIF is smaller than 10, and it means that there is no multicollinearity arising in the restricted model (Gujarati, 1995) 72 APPENDIX Use Wald test to choice model the restricted model or the unrestricted model Table Appendix 3: The results of Wald test Wald Test: Equation: LOG(CO) Test Statistic F-statistic Chi-square Value df 0.669570 74) 2.678279 Probability 0.6151 0.6130 (4, Null Hypothesis Summary: Normalized Restriction (= 0) C(2) C(5) C(6) C(8) Value 0.133387 -0.161014 0.087189 -0.043971 Std Err 0.090620 0.314218 0.235856 0.266694 Restrictions are linear in coefficients Source.- Author’s calculation Hypothesis Ho: o 2= o s = < 6= < g - (Use restricted model) Hypothesis H,: At least ‹z , or ‹z re or o (Use unrestricted model) because P (F > 0.669570) = 0.6151> 0.05 leading to maintain H, It means that restricted model can be used (Hoang Ngoc Nham, 2007, Part I, pp 41-44) 73 APPENDIX Chart Appendix 4.1: The Provincial Competitiveness Index ranking in 2005 30 35 40 45 Binh Duo ng Da Nang Vinh Lo B en Tre ;i ng 76.82 rI70.67 P hue ";Vinh i 68.56 iii 65.24 I 65.09 Do ng Nai 'i 64.14 Quang Ninh Thai Binh Can Tho Kien Giangi Quang 62.93 Tri Binh Dinh P hu Yen Ha i Hung Yen Quang Nam • No 61.39 HCMC › 61.29Nghe A n Hai P ho ng i 61 13 B RVT 61 09 Tien Giang So c T rang Do ng Thap Lo ng A n Bac Ninh Tay Ninh TT-H ue TraVinh Khanh Hoa Binh60.60 T huan HaNam Quang Binh 60.44 i 60.32 60.03 59.72 59.61 59.56 i 59.40 i 59.15 i 58.65 58.49 i 58.06 i 57.44 » 56.77 i 56.25 “ i 55.89 › 55.63 i 54.08 53.97 53.36 ‹ 53.07 i 51.67 “ " A n Giang50.90 Thanh Ho a _ Quang Ngai‹ i 49.29 47.99 47.06 Binh P huo c Nam Dinh Hai Duo ng i 45.97 i 45.79 • Ninh Thuani 44.45 Ninh Binh H a Tay i 41.21 i 38.81 Ha T inh 50 55 60 65 70 75 80 85 90 95 100 ” , Source.- The VNCI & VCCI 2005 74 Chart Appendix 4.2: The Provincial Competitiveness Index ranking in 2006 VeightedPCf Source.- The VNCI & VCCI 2006 75 ... definition of transaction cost by Arrow (1969.p.48) ? ?transaction costs are the costs of running the economic system” Both definitions imply that transaction costs are costs that it includes the direct... basic concept of transaction cost that are those costs of buying and selling in markets which are not passed on in the transaction According to Ronald Coase (1937.p.388), the definition of transaction. .. transaction cost introduced as ? ?cost of using the price mechanism” is based on the notion of the costliness of exchange and the recDgnition of information as scarce and valuable asset Another definition