Firm heterogeneity and total factor productivity: New panel-data evidence from Vietnamese manufacturing firms

• Main Authors: Quang Thanh Ngo, Quang Van Tran
• Format: Article
• Language: English
• Published: Growing Science 2020-01-01
• Series: Management Science Letters
• Subjects: total factor productivity growth; tfp distance; tfp dispersion; fdi-driven tfp; spillover effects; heterogeneity; manufacturing firms; vietnam
• Online Access: http://www.growingscience.com/msl/Vol10/msl_2019_375.pdf
• ISSN: 1923-9335; 1923-9343

This paper investigates firm heterogeneity in total factor productivity across manufacturing sectors for Vietnamese manufacturers over the period 2010-2016. Productivity is proxied by total factor productivity and estimated by following a procedure by Ackerberg et al. (2015) [Ackerberg, D. A., Caves, K., & Frazer, G. (2015). Identification properties of recent production function estimators. Econometrica, 83(6), 2411-2451.], using value-added production. While several measurements of total factor productivity are used, namely: growth, distance, dispersion and spillover effects, firm heterogeneity in productivity sources conveys more information about firm-specific differences in productivity. In this regard, in terms of labor, the larger firms yield higher TFP level/TFP distance /TFP dispersion, whereas, in terms of capital stocks, TFP level/TFP distance /TFP dispersion decreases as firm sizes increase. With respect to average wage, top-quartile firms paying high wages register much greater TFP level/ TFP dispersion than bottom-quartile firms. We find that the beneficial impact of exports on productivity is the most evident when firms become exporters and exporters shorten the TFP distance and strengthen TFP dispersion. Regarding ownership, FDI exporters have significant-ly higher TFP growth/ TFP dispersion than domestic firms. Results from firm heterogeneity effects on TFP certainly provoke policies expanding SMEs in terms of capital stocks and obtaining advantages of labor costs, paying higher wage rate, involving into the trade, and may have the foreign capital investment.