tiểu luận kinh tế lượng THE FACTORS AFFECTING THE QUANTITY OF VIETNAM’S TIMBER AND WOODEN PRODUCTS EXPORTED TO FOREIGN NATIONS

FOREIGN TRADE UNIVERSITY FACULTY OF INTERNATIONAL ECONOMICS ******** FINANCIAL ECONOMETRICS REPORT THE FACTORS AFFECTING THE QUANTITY OF VIETNAM’S TIMBER AND WOODEN PRODUCTS EXPORTED TO FOREIGN NATIONS Class: Financial Econometrics KTEE310.1 Lecturer: MSc Nguyen Thuy Quynh Members: Vu Phuong Anh – 1813340009 Pham Bui Hanh Duyen – 1813340020 Nguyen Phan My Duyen - 1816340018 Dong Nguyen Thanh Hai – 1810340001 Nguyen Quynh Nga – 1813340042 Ha Noi, 12/2019 ABSTRACT .1 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com INTRODUCTION .2 SECTION I: OVERVIEW OF THE TOPIC SECTION II: MODEL SPECIFICATION 14 Methodology 14 Theoretical model specification 14 Describe the data .16 SECTION 3: ESTIMATED MODEL AND STATISTICAL INFERENCES 37 Estimated Model .37 Diagnosis Testing .39 Hypothesis Testing 45 Recommendation .50 CONCLUSION 52 REFERENCES 54 APPENDIX 55 APPENDIX 2: DO-FILE 59 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABSTRACT The scope of our research regards factors that might have momentous impacts on the quantity of Viet Nam’s timber and wooden products being exported to foreign nations The panel analysis within our project was carried out using data from different countries (Germany, Netherlands, USA, Japan, England, France, …) in the period from 2001 to 2016 There are elements being researched in our data, including the quantity of Viet Nam’s timber being imported by other countries, the population, timberland, GDP of import countries and the geographical distance from Viet Nam to these countries We genuinely conducted a wide variety of tests so as to evaluate the importance of the examined elements to Viet Nam’s wood exports The tests we used are hypothesis testing, diagnosis testing, … Ultimately, the results have shown that there is seemingly a close correspondence between the aforementioned independent variables and the explained variable Thanks to the adequate and comprehensive tests as well as sufficient data collecting, our group were capable of acquiring a more extensive knowledge about the economy in general and Viet Nam’s timber exports in specific We can also develop a further understanding over the disturbances that contribute to the fluctuation of Viet Nam’s timber exports Consequently, Viet Nam’s government is now able to impose radical and plausible policies to our timber industry based on the collected data as well as conducted tests LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com INTRODUCTION Nowadays, in our contemporary society, wooden products have become truly intimate and crucial to our lives It is indisputable that everyone loves wooden floors, wooden furniture and so on Unlike some developed nations, Viet Nam has the merits of the vast area of forest, and an ancient timber industry In fact, our craftsman are capable of making really sophisticated and brilliant products, albeit not as ingenious and luxurious as some countries Nonetheless, our products still yield a surprisingly well finish and quality with a decent price Hence, Viet Nam’s economy in recent years witnessed a proliferation in the timber industry, with the prosperity of numerous wood companies Nonetheless, our timber exports have some significant fluctuations sometimes Subjectively speaking, there must be some addressable reasons for this phenomenon Inevitably, in order to ensure our timber industry’s development and our wood exports, it is of importance to figure out this phenomenon’s dominant justifications Having researched about Viet Nam’s wood industry, we assume that there are elements attributing to those unstable exports We examined this assumption with the tools provided from econometrics and the software STATA Our model includes five variables, one is the dependent variable (Viet Nam’s timber exports) and the rest are independent variables (the quantity of Viet Nam’s timber being imported by other countries, the population, timberland, GDP of import countries and the geographical distance from Viet Nam to these countries) We hope that these variables will be sufficient for our research and facilitate the analysing and testing processes Governments, firms, organisations and everyone can use our project as a reference material for their researching purposes or as a step to develop our economy substantially In spite of our objective knowledge and efforts, there might still be some inexorable mistakes our study We look forward to receiving your feedback on our work so that we can refine our project and enhance our perceptions LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com SECTION I: OVERVIEW OF THE TOPIC Historically, many researches have been carried out about the quantity of Vietnam’s timber and wooden products being exported to foreign nations and the factors that have impact on it According to a study from General Statistics Office of Vietnam, Vietnam is a leading wood exporter in ASEAN, ranks 2nd in Asia and 5th in the world in terms of export revenue from forestry products Vietnam also accounts for 6% of the global timber and wooden furniture market which is estimated at 130 billion USD Besides, many trade agreements and documents that have been signed so far will set up legal corridors and mechanisms to encourage market expansion for the forestry sector Taking everything into consideration, we can see a lot of development potential in wood exporting in the future However, there is no research which include all the factors that affect forestry sector in Vietnam, especially trading market of timber and wooden furniture Therefore, we decided to study and research about “The factors affecting the quantity of Vietnam’s timber and wooden products exported to foreign nations” to find out how these elements have impact on the exporting quantity of timber and wooden products Definition of each variable: 1.1 Gross Domestic Product (GDP) Gross Domestic Product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period 1.2 Population A population is the number of organisms of the same species that live in a particular geographic area at the same time, with the capability of interbreeding; here is human 1.3 Annual timber harvested area of imported countries LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Timber harvesting involves planning harvest and reforestation; cutting trees and moving them to a landing; processing, sorting and loading; and transporting materials Annual timber harvested area of imported countries is acreage of forest areas which have been exploited for wood every year in countries that import timber from Vietnam 1.4 International economic relation International economic relation is an information system in the information society It is also a social and market-based control system rather vividly reflects its current state It affects global alliances, globalization, and the economic health of nations 1.5 Economic distance Economic distance has two distinct yet interrelated definitions One is a relative measure of household well-being based on a percentage of median income, another is an absolute difference in per capita income between social groups Economic theories The export of goods in general and the export of timber in particular are a part of international trade For most countries in the world, international trade is equivalent to a large proportion of GDP Many economists have come up with different models to predict the structure of international trade and analyze the effects of factors on exports International trade theory is a sub-field of economics which analyzes the patterns of international trade, its origins, and its welfare implications International trade policy has been highly controversial since the 18th century up to our days International trade theory and economics itself have developed as means to evaluate the effects of trade policies 2.1 Adam Smith's model Adam Smith was an 18th-century philosopher renowned as the father of modern economics and a major proponent of laissez-faire economic policies The core of LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Smith's thesis was that humans' natural tendency toward self-interest (or in modern terms, looking out for yourself) results in prosperity Smith argued that by giving everyone freedom to produce and exchange goods as they pleased (free trade) and opening the markets up to domestic and foreign competition, people's natural selfinterest would promote greater prosperity than with stringent government regulations This free-market force became known as the invisible hand, but it needed support to bring about its magic Adam Smith describes trade taking place as a result of countries having absolute advantage in production of particular goods, relative to each other Within Adam Smith’s framework, absolute advantage refers to the instance where one country can produce a unit of a good with less labor than another country 2.2 The Ricardian Model The Ricardian Model of Trade is developed by English political economist David Ricardo in his magnum opus On the Principles of Political Economy and Taxation (1817) It is the first formal model of international trade Ricardo strengthens the case for free trade by giving it a theoretical framework based on the logic of comparative advantage This concept is of such historical importance in the field of economics that when Nobel laureate Paul Samuelson was once questioned by a self-important mathematician to "name one proposition in all of the social sciences which is both true and non-trivial, he responded confidently, "comparative advantage." Like all other economic theories, the Ricardian Model makes a number of basic assumptions to construct an imaginary world: There are only countries They produce goods Production requires only input, labor, which is limited in amount in both countries and is perfectly immobile (i.e strict border control) Opportunity cost between the goods is constant in each country (Graphically, the production possibility frontier is a straight line) There is neither transaction cost nor transportation cost By definition, a country has absolute advantage over the other if it is more efficient at producing both goods than the other country A country has comparative advantage in producing a certain good if the opportunity cost of producing that good is lower than in the other country Ricardo observes that an absolute advantage does not LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com necessarily imply a comparative advantage As long as the relative cost of production is different in the countries, comparative advantage exists Under autarky condition (no trade), each of the two countries produces some combination of the goods Once trade becomes possible, they are motivated to specialize fully in the production of the good in which they have a comparative advantage, thus allocating their scarce resources (labor) to its most productive uses In the aggregate, people in both countries end up consuming more of both goods than they did in the absence of trade Since more consumption means greater satisfaction (using economic jargon, equilibrium shifts to a higher indifference curve), trade allow both countries to improve their welfare The Ricardian Model concludes therefore that international trade benefits all participants 2.3 Heckscher–Ohlin model The Heckscher-Ohlin model is an economic theory that proposes that countries export what they can most efficiently and plentifully produce Also referred to as the H-O model or 2x2x2 model, it's used to evaluate trade and, more specifically, the equilibrium of trade between two countries that have varying specialties and natural resources The model emphasizes the export of goods requiring factors of production that a country has in abundance It also emphasizes the import of goods that a nation cannot produce as efficiently It takes the position that countries should ideally export materials and resources of which they have an excess, while proportionately importing those resources they need The Heckscher-Ohlin model evaluates the equilibrium of trade between two countries that have varying specialties and natural resources The model explains how a nation should operate and trade when resources are imbalanced throughout the world The model isn't limited to commodities, but also incorporates other production factors such as labor The Heckscher-Ohlin model explains mathematically how a country should operate and trade when resources are imbalanced throughout the world It pinpoints a preferred balance between two countries, each with its resources LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 2.4 Stolper-Samuelson theorem According to the Stolper-Samuelson theorem, the export of a product which is relatively cheap, abundant resource makes this resource scarcer in the domestic market Thus, the increased demand for the abundant resource leads to an increase in its price and an increase in its income Simultaneously, the income of the resource used intensively in the import-competing product decreases as its demand falls Simply put, this theorem indicates that an increase in the price of a product rises the income earned by resources that are used intensively in its production Conversely, a decrease in the price of a product reduces the income of the resources that it uses intensively The abundant resource that have comparative advantage realizes an increase in income, and the scare resource realizes a decrease in its income regardless of industry This trade theory concludes that some people will suffer losses from free trade even in the long-term 2.5 New trade theory New Trade Theory (NTT) is an economic theory that was developed in the 1970s as a way to predict international trade patterns NTT came about to help us understand why countries are trade partners when they are trading similar goods and services This is especially true in key economic sectors like electronics, food, and automotive We have cars made in the United States, yet we purchase many cars made in other countries These are usually products that come from large, global industries that directly impact international economies Those tablets we talked about earlier are a perfect example The United States both produces them and also imports them NTT argues that, because of substantial economies of scale and network effects, it pays to export tablets to sell in another country Those countries with the advantages will dominate the market, and the market takes the form of monopolistic competition Monopolistic competition tells us that the firms are producing a similar product that isn't exactly the same, but awfully close According to NTT, two key concepts LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com give advantages to countries that import goods to compete with products from the home country: Network effects are the way one person with a good or service affects the value of that good or service to others The value of the product or service is increased as the number of individuals using it increases This is also sometimes called the bandwagon effect Consumers like more choices, but they also want products and services with high utility, and the network effect offers increased utility to some goods and services over others Economies of scale are the situations where there are savings in costs that are gained by early entry into a market or an increased production capacity It is also possible to benefit from this concept if entering a new industry with a lot of money and resources means that a company is able to quickly reach efficiency The leverage formed by both of these core concepts has formidable effects on lowering the average cost of a unit produced, which means that some countries can still sell their products in other countries when they are so similar 2.6 New new trade theory The realm of international trade theory has entered a new stage in the 21st century, with active use of firm-level data and a next-generation trade theory that could be termed "New" New Trade Theory bursting into the mainstream Exports account for a large proportion of gross domestic production in countries around the world, but it has come to light in recent years that only a small minority of firms actually engages in export However, neither old nor new trade theories were able to explain the fact that exporting firms comprise only a very few highly productive companies A scenario in which Company A in a given industry exports while Company B in the same industry does not a scenario hypothesized by traditional trade theories or New Trade Theory Both the trade theories of Ricardo and Heckscher-Ohlin and New Trade Theory (at least within an industry) presume representative firms equal in productivity (i.e., firms qualitatively the same) 10 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com - As for “Si”: p – value = 0.103 > α = 0.05; accept null hypothesis Therefore, with the data given, the size of timberland area of wood importing countries does not have much impact on total Vietnam wood exporting Therefore we can consider to eliminate the “Si” from our model Test C, T – value test Establish the hypothesis: { H : β i=0 i =1,5 H : βi≠ α t – critical: t n−k , =t 107 ;0.025 =1.982 If |t|>t c = 1.982 then reject H and accept H Which means that that variable has a statistically significant impact on total campus crimes Table T-value summarize table: As described by the table, only GDP and POP pass the hypothesis test for t –value, which mean H 0: β 1= and H 0: β 2= are rejected The conclusion for t – value test is coincided with p – value test: total GDP and total population of wood importing countries does not have much impact on total Vietnam wood exporting with significant level of 5% An increase in “GDP” (or “POP”) variable leads to an increase in “Q” 50 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com 3.3 Testing the fitness of the model We know that one of the measures of goodness of fit of a regression model is R2 (coefficient of determination), which, as we know, is defined as: R= ESS RSS =1− TSS TSS R2, thus defined, of necessity lies between and The closer it is to 1, the better is the H :The model doess not fit fit Hypothesis : H :The model fits { { H : R =0 H : R2 ≠ with significance level α =0.05 We follow the Fisher equation: Fqs = R2 /( k−1) (1−R )/(n−k) Taking the result obtained from command reg and robust in STATA: R2= 0.5257 Prob > F= 0.0000