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Assessment of TFP change at provincial level in Vietnam: New evidence using Färe–Primont productivity index

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  • Viet Nguyen, Thanh
  • Simioni, Michel
  • Le Van, Dao

Abstract

Vietnam has become a lower middle-income country in less than 30 years, and is now facing the middle-income trap risk. Knowledge of changes in total factor productivity (TFP) is an essential element in assessing this risk. An in-depth analysis of the evolution of TFP and its determinants in Vietnam is presented in this paper. TFP evaluation uses a recently proposed multiplicative-complete economically ideal index, namely the Färe–Primont index, to evaluate TFP and to decompose it into its different components: technical change, pure technical, mix and scale efficiencies. TFP is computed at the provincial level over the 2010–2017 period. The results shows that estimated provincial TFP values are, on average, small whatever the considered year, but they have increased with an annual compound growth rate of 3.46%. Technical progress as measured by TFP* appears to be the main driver of TFP growth over the period, with an annual compound growth rate of 3.34%. The expansion of the production set under constant returns-to-scale, from which TFP* is measured, is guided by movements of Ho Chi Minh city. Accordingly, on average, overall productive efficiency stagnated, with an annual compound growth rate of 0.12%. Technical efficiency has also stagnated over the period with its annual compound growth rate -0.62%. The results imply that there has been an increasing gap between provinces in terms of the resource allocation efficiency. This evolution may have negative consequences on sustainable economic development and lead the country into the risk of middle income trap in the future.

Suggested Citation

  • Viet Nguyen, Thanh & Simioni, Michel & Le Van, Dao, 2019. "Assessment of TFP change at provincial level in Vietnam: New evidence using Färe–Primont productivity index," Economic Analysis and Policy, Elsevier, vol. 64(C), pages 329-345.
    • Handle: RePEc:eee:ecanpo:v:64:y:2019:i:c:p:329-345
    DOI: 10.1016/j.eap.2019.09.007
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    1. Huynh, Linh & Hoang, Hien, 2021. "Technical Efficiency and Total Factor Productivity Changes in Manufacturing Industries: Recent Advancements in Stochastic Frontier Model Approach," MPRA Paper 117621, University Library of Munich, Germany, revised 2022.

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    More about this item

    Keywords

    Total factor productivity; Technical change; Technical efficiency; Mix and scale efficiencies; Färe–Primont index; Vietnam;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • B21 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Microeconomics
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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