Productivity, Efficiency and Firm Size Distribution: Evidence from Vietnam

By applying recently developed methodologies to Vietnamese data from 2000 to 2016, this paper studies production efficiencies and total factor productivity in manufacturing industries, using two separate empirical methodologies. The paper shows that middle-sized firms’ production efficiencies tend to be lower than those of small-sized or large-sized firms in most of the manufacturing industries, and that the middle-sized firms are quite diverse in terms of efficiencies. Further, we show that the level of productivity is also quite diverse across different firm sizes in most industries. Given these observations, we present a simple theoretical analysis to indicate how our empirical findings could affect a firm’s decision in expanding business size. Over the past few decades, the Vietnamese government has conducted policies to promote small-sized and middlesized firms. Our findings indicate the importance of adopting policies that reduce the uncertainty that those firms may possibly face, such as financial support.