IDEAS home Printed from https://ideas.repec.org/p/wai/econwp/14-09.html
   My bibliography  Save this paper

Does Rising Import Competition Harm Local Firm Productivity in Less Advanced Economies? Evidence from Vietnam's Manufacturing Sector

Author

Listed:
  • Tinh Doan

    (University of Waikato)

  • Son Nguyen

    (VNU University of Economics and Business)

  • Tuyen Tran

    (VNU University of Economics and Business)

  • Huong Vu

    (University of Waikato)

  • Steven Lim

    (University of Waikato)

Abstract

This paper examines whether rising import penetration has an effect on the productivity of domestic firms. The study uses data on a 10-year unbalanced panel of firms in the manufacturing sector in Vietnam from 2000 to 2009. Panel and instrumental variable methods are used to control for firm heterogeneity and endogeneity of import penetration. We find significantly negative effects of import competition on local firms’ productivity. Further investigation on the basis of firm size and industry technology levels shows that SMEs are more adversely affected, but that industry technology level does not matter.

Suggested Citation

  • Tinh Doan & Son Nguyen & Tuyen Tran & Huong Vu & Steven Lim, 2014. "Does Rising Import Competition Harm Local Firm Productivity in Less Advanced Economies? Evidence from Vietnam's Manufacturing Sector," Working Papers in Economics 14/09, University of Waikato.
    • Handle: RePEc:wai:econwp:14/09
    as

    Download full text from publisher

    File URL: https://repec.its.waikato.ac.nz/wai/econwp/1409.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Van Biesebroeck, Johannes, 2008. "The Sensitivity of Productivity Estimates," Journal of Business & Economic Statistics, American Statistical Association, vol. 26, pages 311-328.
    2. Matteo Bugamelli & Silvia Fabiani & Enrico Sette, 2010. "The pro-competitive effect of imports from China: an analysis of firm-level price data," Temi di discussione (Economic working papers) 737, Bank of Italy, Economic Research and International Relations Area.
    3. Nicholas Bloom & Mirko Draca & John Van Reenen, 2016. "Trade Induced Technical Change? The Impact of Chinese Imports on Innovation, IT and Productivity," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 83(1), pages 87-117.
    4. Nina Pavcnik, 2002. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(1), pages 245-276.
    5. A. Colin Cameron & Jonah B. Gelbach & Douglas L. Miller, 2008. "Bootstrap-Based Improvements for Inference with Clustered Errors," The Review of Economics and Statistics, MIT Press, vol. 90(3), pages 414-427, August.
    6. David H. Autor & David Dorn & Gordon H. Hanson, 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States," American Economic Review, American Economic Association, vol. 103(6), pages 2121-2168, October.
    7. Fernandes, Ana M., 2007. "Trade policy, trade volumes and plant-level productivity in Colombian manufacturing industries," Journal of International Economics, Elsevier, vol. 71(1), pages 52-71, March.
    8. László Halpern & Gábor Körösi, 2001. "Efficiency and market share in the Hungarian corporate sector," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(3), pages 559-592, November.
    9. Doan, Tinh & Stevens, Philip, 2012. "Evolution of competition in Vietnam industries over the recent economic transition," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 6, pages 1-24.
    10. Subal C. Kumbhakar, 2003. "Factor productivity and technical change," Applied Economics Letters, Taylor & Francis Journals, vol. 10(5), pages 291-297, April.
    11. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    12. Philippe Aghion & Robin Burgess & Stephen Redding & Fabrizio Zilibotti, 2005. "Entry Liberalization and Inequality in Industrial Performance," Journal of the European Economic Association, MIT Press, vol. 3(2-3), pages 291-302, 04/05.
    13. Grossman, Gene M. & Helpman, Elhanan, 1995. "Technology and trade," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 25, pages 1279-1337, Elsevier.
    14. Ram C. Acharya & Wolfgang Keller, 2009. "Technology transfer through imports," Canadian Journal of Economics, Canadian Economics Association, vol. 42(4), pages 1411-1448, November.
    15. Mion, Giordano & Zhu, Linke, 2013. "Import competition from and offshoring to China: A curse or blessing for firms?," Journal of International Economics, Elsevier, vol. 89(1), pages 202-215.
    16. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
    17. Pedro Cavalcanti Ferreira & JosÈ Luiz Rossi, 2003. "New Evidence from Brazil on Trade Liberalization and Productivity Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1383-1405, November.
    18. Sivadasan Jagadeesh, 2009. "Barriers to Competition and Productivity: Evidence from India," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-66, September.
    19. Álvarez, Roberto & Claro, Sebastián, 2009. "David Versus Goliath: The Impact of Chinese Competition on Developing Countries," World Development, Elsevier, vol. 37(3), pages 560-571, March.
    20. Wolfgang Keller, 2004. "International Technology Diffusion," Journal of Economic Literature, American Economic Association, vol. 42(3), pages 752-782, September.
    21. Sarra Ben Yahmed & Sean Dougherty, 2012. "Import Competition, Domestic Regulation and Firm-Level Productivity Growth in the OECD," OECD Economics Department Working Papers 980, OECD Publishing.
    22. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2011. "Multiproduct Firms and Trade Liberalization," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(3), pages 1271-1318.
    23. Kasahara, Hiroyuki & Rodrigue, Joel, 2008. "Does the use of imported intermediates increase productivity? Plant-level evidence," Journal of Development Economics, Elsevier, vol. 87(1), pages 106-118, August.
    24. Irene Brambilla & Amit K. Khandelwal & Peter K. Schott, 2010. "China's Experience under the Multi-Fiber Arrangement (MFA) and the Agreement on Textiles and Clothing (ATC)," NBER Chapters, in: China's Growing Role in World Trade, pages 345-387, National Bureau of Economic Research, Inc.
    25. Ackerberg, Daniel & Caves, Kevin & Frazer, Garth, 2006. "Structural identification of production functions," MPRA Paper 38349, University Library of Munich, Germany.
    26. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    27. Halpern, László & Koren, Miklós & Szeidl, Adam, 2005. "Imports and Productivity," CEPR Discussion Papers 5139, C.E.P.R. Discussion Papers.
    28. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    29. Lawrence Edwards & Rhys Jenkins, 2015. "The Impact of Chinese Import Penetration on the South African Manufacturing Sector," Journal of Development Studies, Taylor & Francis Journals, vol. 51(4), pages 447-463, April.
    30. Thomas J. Holmes & James A. Schmitz, 2010. "Competition and Productivity: A Review of Evidence," Annual Review of Economics, Annual Reviews, vol. 2(1), pages 619-642, September.
    31. Lutz Altenburg & Anke Brenken, 2008. "Effort, trade, and unemployment," Canadian Journal of Economics, Canadian Economics Association, vol. 41(3), pages 864-893, August.
    32. Keller, Wolfgang & Acharya, Ram C., 2008. "Estimating the Productivity Selection and Technology Spillover Effects of Imports," CEPR Discussion Papers 6860, C.E.P.R. Discussion Papers.
    33. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(2), pages 317-341.
    34. Wooldridge, Jeffrey M., 2009. "On estimating firm-level production functions using proxy variables to control for unobservables," Economics Letters, Elsevier, vol. 104(3), pages 112-114, September.
    35. Lutz Altenburg & Anke Brenken, 2008. "Effort, trade, and unemployment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(3), pages 864-893, August.
    36. Moulton, Brent R, 1990. "An Illustration of a Pitfall in Estimating the Effects of Aggregate Variables on Micro Unit," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 334-338, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nguyen, Phuc Van & Huynh, Vy Dang Bich & Nguyen, Phong Thanh & Nguyen, Quyen Le Hoang Thuy To, 2017. "Measuring production efficiency level of Vietnam for inputs imported from China," MPRA Paper 96585, University Library of Munich, Germany.
    2. Duc Anh Dang, 2017. "The effects of Chinese import penetration on firm innovation: Evidence from the Vietnamese manufacturing sector," WIDER Working Paper Series wp-2017-77, World Institute for Development Economic Research (UNU-WIDER).
    3. My Duong & Mark J. Holmes & Anna Strutt & Steven Lim, 2019. "Effects of Trade Agreements and Foreign Direct Investment on Trade: Evidence from Vietnam," International Journal of Economics and Financial Issues, Econjournals, vol. 9(3), pages 116-126.
    4. Victor Denisov, 2018. "Untapped Opportunities for the State Support of Agricultural Labour in Russia," Economy of region, Centre for Economic Security, Institute of Economics of Ural Branch of Russian Academy of Sciences, vol. 1(3), pages 1003-1013.
    5. Ayhab F. Saad, 2017. "Trade and technology adoption," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 26(1), pages 1-24, January.
    6. A. A. Gnidchenko, 2017. "Import substitution as a complementary strategy," Studies on Russian Economic Development, Springer, vol. 28(6), pages 593-599, November.
    7. Duc Anh Dang, 2017. "The effects of Chinese import penetration on firm innovation: Evidence from the Vietnamese manufacturing sector," WIDER Working Paper Series 077, World Institute for Development Economic Research (UNU-WIDER).
    8. Oziengbe Scott Aigheyisi, 2019. "Import Competition And Labour Productivity In Nigeria," Oradea Journal of Business and Economics, University of Oradea, Faculty of Economics, vol. 4(2), pages 26-34, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Christian Darko & Giovanni Occhiali & Enrico Vanino, 2021. "The Chinese are Here: Import Penetration and Firm Productivity in Sub-Saharan Africa," Journal of Development Studies, Taylor & Francis Journals, vol. 57(12), pages 2112-2135, December.
    2. Patricia Augier & Olivier Cadot & Marion Dovis, 2013. "Imports and TFP at the firm level: the role of absorptive capacity," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(3), pages 956-981, August.
    3. Maria Bas & Vanessa Strauss-Kahn, 2014. "Does importing more inputs raise exports? Firm-level evidence from France," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 150(2), pages 241-275, May.
    4. Richard Bräuer & Matthias Mertens & Viktor Slavtchev, 2023. "Import competition and firm productivity: Evidence from German manufacturing," The World Economy, Wiley Blackwell, vol. 46(8), pages 2285-2305, August.
    5. Kasahara, Hiroyuki & Rodrigue, Joel, 2008. "Does the use of imported intermediates increase productivity? Plant-level evidence," Journal of Development Economics, Elsevier, vol. 87(1), pages 106-118, August.
    6. Carol Newman & John Rand & Finn Tarp, 2016. "Imports, supply chains, and firm productivity," WIDER Working Paper Series 090, World Institute for Development Economic Research (UNU-WIDER).
    7. Daniela Maggioni, 2013. "Productivity Dispersion and its Determinants: The Role of Import Penetration," Journal of Industry, Competition and Trade, Springer, vol. 13(4), pages 537-561, December.
    8. Carol Newman & John Rand & Finn Tarp, 2016. "Imports, supply chains, and firm productivity," Working Paper Series UNU-WIDER Working Paper w, World Institute for Development Economic Research (UNU-WIDER).
    9. Klaus S. Friesenbichler & Agnes Kügler & Andreas Reinstaller, 2021. "The Impact of Import Competition from China on Firm-level Productivity Growth in the EU," WIFO Working Papers 623, WIFO.
    10. Newman, Carol & Rand, John & Tarp, Finn, 2023. "Imports, supply chains and firm productivity," World Development, Elsevier, vol. 172(C).
    11. Blalock, Garrick & Veloso, Francisco M., 2007. "Imports, Productivity Growth, and Supply Chain Learning," World Development, Elsevier, vol. 35(7), pages 1134-1151, July.
    12. Hansen, Thorsten, 2010. "Tariff Rates, Offshoring and Productivity: Evidence from German and Austrian Firm-Level Data," Discussion Papers in Economics 11465, University of Munich, Department of Economics.
    13. Zhang, Hongsong, 2017. "Static and dynamic gains from costly importing of intermediate inputs: Evidence from Colombia," European Economic Review, Elsevier, vol. 91(C), pages 118-145.
    14. Daniel A. Ackerberg & Kevin Caves & Garth Frazer, 2015. "Identification Properties of Recent Production Function Estimators," Econometrica, Econometric Society, vol. 83, pages 2411-2451, November.
    15. Antonio Navas & Francesco Serti & Chiara Tomasi, 2020. "The role of the gravity forces on firms’ trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 53(3), pages 1059-1097, August.
    16. Cathy Ge Bao & Maggie Xiaoyang Chen, 2018. "Foreign Rivals Are Coming to Town: Responding to the Threat of Foreign Multinational Entry," American Economic Journal: Applied Economics, American Economic Association, vol. 10(4), pages 120-157, October.
    17. Goya, Daniel, 2021. "The network effect of Chinese competition on what domestic suppliers produce," Economic Modelling, Elsevier, vol. 102(C).
    18. Nataraj, Shanthi, 2011. "The impact of trade liberalization on productivity: Evidence from India's formal and informal manufacturing sectors," Journal of International Economics, Elsevier, vol. 85(2), pages 292-301.
    19. Jan De Loecker & Pinelopi K. Goldberg & Amit K. Khandelwal & Nina Pavcnik, 2016. "Prices, Markups, and Trade Reform," Econometrica, Econometric Society, vol. 84, pages 445-510, March.
    20. Rigby, David L. & Kemeny, Thomas & Cooke, Abigail, 2017. "Plant exit and U.S. imports from low-wage countries," International Economics, Elsevier, vol. 149(C), pages 27-40.

    More about this item

    Keywords

    import penetration; productivity; Vietnam;
    All these keywords.

    JEL classification:

    • F19 - International Economics - - Trade - - - Other
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • P45 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - International Linkages

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wai:econwp:14/09. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Geua Boe-Gibson (email available below). General contact details of provider: https://edirc.repec.org/data/dewaknz.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.