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

Thanh Nguyen, Michel Simioni and Dao Le Van

Economic Analysis and Policy, 2019, vol. 64, issue C, 329-345

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.

Keywords: Total factor productivity; Technical change; Technical efficiency; Mix and scale efficiencies; Färe–Primont index; Vietnam (search for similar items in EconPapers)
JEL-codes: B21 B41 D24 F63 O47 O53 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Assessment of TFP change at provincial level in Vietnam: new evidence using Färe–Primont productivity index (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:64:y:2019:i:c:p:329-345

DOI: 10.1016/j.eap.2019.09.007

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