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Does rising import competition harm local firm productivity in less advanced economies? Evidence from the Vietnam's manufacturing sector

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  • Tinh Doan
  • Son Nguyen
  • Huong Vu
  • Tuyen Tran
  • Steven Lim

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 firm heterogeneity and endogeneity of import penetration. We find statistically significant and negative effects of import competition on local firms’ productivity, but the effect in terms of magnitude is economically small. Further investigation shows no clear evidence of variations in the effects by firm size and technological level. However, we find that rising import penetration is associated with the likelihood of firm death.

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  • Tinh Doan & Son Nguyen & Huong Vu & Tuyen Tran & Steven Lim, 2016. "Does rising import competition harm local firm productivity in less advanced economies? Evidence from the Vietnam's manufacturing sector," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(1), pages 23-46, February.
  • Handle: RePEc:taf:jitecd:v:25:y:2016:i:1:p:23-46
    DOI: 10.1080/09638199.2015.1035739
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    2. 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.
    3. A. A. Gnidchenko, 2017. "Import substitution as a complementary strategy," Studies on Russian Economic Development, Springer, vol. 28(6), pages 593-599, November.
    4. 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).
    5. 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.
    6. 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.
    7. 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).
    8. 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.

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    More about this item

    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

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