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

Author

Listed:
  • Leonardo Baccini
  • Giammario Impullitti
  • Edmund J. Malesky

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.

Suggested Citation

  • Leonardo Baccini & Giammario Impullitti & Edmund J. Malesky, 2017. "Globalization and State Capitalism: Assessing Vietnam’s Accession to the WTO," Discussion Papers 2017-10, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:17/10
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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • P31 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Socialist Enterprises and Their Transitions
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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