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Globalization and State Capitalism: Assessing Vietnam's Accession to the WTO

Leonardo Baccini, Giammario Impullitti and Edmund J. Malesky

No 6618, CESifo Working Paper Series from CESifo Group Munich

Abstract: What do state-owned enterprises (SOEs) do? How do they respond to market incentives? Can we expect substantial efficiency gains from trade liberalization in economies with a strong presence of SOEs? Using a new dataset of Vietnamese firms we document a set of empirical regularities distinguishing SOEs from private firms. We embed some of these features characterizing SOEs operations in a model of trade with firm heterogeneity and show that they can hinder the selection effects of openness and tame the aggregate productivity gains from trade. We empirically test these predictions analyzing the response of Vietnamese firms to the 2007 WTO accession. Our result show that WTO accession is associated with higher probability of exit, lower markups, and substantial increases in productivity for private firms but not for SOEs. Domestic barriers to entry and preferential access to credit are key drivers of the different response of SOEs to trade liberalization. Our estimates suggest that the overall productivity gains would have been about 66% larger in a counterfactual Vietnamese economy without SOEs.

Keywords: state capitalism; state-owned enterprises; trade liberalization; heterogeneous firms; gains from trade; WTO; Vietnam (search for similar items in EconPapers)
JEL-codes: F12 F13 F14 P31 P33 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cta, nep-int, nep-sea and nep-tra
Date: 2017
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