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State owned enterprises and capital misallocation in Vietnam

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  • Thang Ngoc Bach

Abstract

This study uses the first comprehensive data on Vietnamese manufacturing firms and quantifies the allocative efficiency improvement due to massive entry of private firms amid a simultaneous contraction of state-owned enterprises (SOEs) in the period 2000–2008. It finds that allocative efficiency improvement contributes considerably to the sector’s annual Total Factor Productivity growth, and firm’s entry and exit exerts an increasingly important role in the second half of this period. The productivity dispersion within narrowly-defined industries remains, however, large and persistent. Such effect is attributed to the fact that SOEs disproportionately absorb credit in a period marked with unprecedented growth in domestic credit supply. This paper finds that commercial and subsidized credit per se exhibits a capital distortion reducing effect, but awarding more commercial and subsidized credit to the SOEs, in reference to the private counterparts, yields the anti-capital distortion reducing effect that intensifies with the distribution of higher quantiles.

Suggested Citation

  • Thang Ngoc Bach, 2019. "State owned enterprises and capital misallocation in Vietnam," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 24(3), pages 430-451, July.
    • Handle: RePEc:taf:rjapxx:v:24:y:2019:i:3:p:430-451
    DOI: 10.1080/13547860.2019.1616443
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    Cited by:

    1. Phan Le, 2022. "Capital Misallocation and State Ownership Policy in Vietnam," The Economic Record, The Economic Society of Australia, vol. 98(S1), pages 52-64, September.
    2. Bach, Thang Ngoc & Le, Thanh & Nguyen, Thang Xuan & Hoang, Khanh, 2023. "Gender discrimination, social networks and access to informal finance of Vietnamese small and medium enterprises," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 358-372.
    3. Phu Nguyen-Van & Ngoc Minh Nguyen & Ngoc Anh Nguyen, 2023. "Capital diversion in Vietnamese state-owned enterprises," EconomiX Working Papers 2023-29, University of Paris Nanterre, EconomiX.
    4. Thang Bach & Charles Harvie & Thanh Le, 2021. "How credit constraints affect small and medium enterprises' strategic employment decisions and employees' labour outcomes: Evidence from Vietnam1," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 29(2), pages 319-341, April.
    5. Qingjun Zhang & Lan Yang & Chuan Liu, 2021. "Vertical structure, capital misallocation and capital allocation efficiency of the real economy," Economic Change and Restructuring, Springer, vol. 54(2), pages 557-584, May.

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