Revisiting Exports and Foreign Direct Investment in Vietnam

Since 1986, Vietnam has undertaken various reform measures in the trade and foreign investment area. This paper finds significant contributions of world trade, and competitiveness and liberalization effects to Vietnam's export growth over the period 1997–2008. Vietnam's exports became more competitive and better complemented the import demand of Vietnam's trade partners. In addition, dynamic comparative advantage became evident in many products, but significant room remains for improving export competitiveness. Foreign direct investment (FDI) inflows also increased and helped stimulate Vietnam's exports. FDI inflows have increased in both the short‐ and long‐term, yet are only of a limited magnitude. This necessitates more effective measures to enhance the linkages between FDI and domestic enterprises.     

TESTING REGULATORY CONSISTENCY

We undertake an analysis of regulatory consistency using a database of publicly available regulatory decisions in Australia. We propose a simple exploratory model which allows us to test for regulatory consistency across jurisdictions and industries without detailed knowledge of the regulatory process. We compare two measures using our approach—the weighted average cost of capital (WACC) and the proportion of firms' revenue requirement claims disallowed by the regulator. Our comparison suggests that the WACC is a very poor measure of regulatory consistency. Moreover, our empirical results may be interpreted as indicating that a range of measures ought to be considered when assessing regulatory consistency. Our results also provide an empirical foundation for theoretical modeling of regulatory processes. (JEL L51)     

Income distribution and economic development: Insights from machine learning

We draw upon recent advances that combine causal inferences with machine learning, to show that poverty is the key income distribution measure that matters for development outcomes. In a predictive framework, we first show that LASSO chooses only the headcount measure of poverty from 37 income distribution measures in predicting schooling, institutional quality, and per capita income. Next, causal inferences with post‐LASSO models indicate that poverty matters more strongly for development outcomes than does the Gini coefficient. Finally, instrumental variable estimates in conjunction with post‐LASSO models show that compared to Gini, poverty is more strongly causally associated with schooling and per capita income, but not institutional quality. Our results question the literature's overwhelming focus on the Gini coefficient. At the least, our results imply that the causal link from inequality (as measured by Gini) to development outcomes is tenuous.     

Will that be cash or credit? Payment preferences and rising VAT in Argentina

This article studies how Argentina’s value-added tax (VAT) revenue has risen to historic highs since its 2001 sovereign default and continues to grow despite unchanged VAT rates, slow economic growth, stagnant household consumption, and low commodity prices after 2010. In 2015, VAT revenue accounted for one-quarter of all tax revenue in Argentina. We show that Argentina’s banked population went from less than 41.6% in 2003 to 89.6% in 2016. Consequently, there was significant growth in electronic payments via credit cards and debit cards. Using time series regression, the authors show that the rising banked population and card growth is correlated with VAT-to-GDP increases from 2002 to 2015. The authors posit that one reason for these correlations is that some consumption is shifting from informal (harder to tax) markets to formal (easier to tax markets) as cash use declined and card use grew. Also, rising electronic payments likely explains improved VAT compliance as well—the Argentine VAT noncompliance rate averaged 36.4% between 2000 and 2005 but improved to 20.5% between 2006 and 2010 (Trigueros, Longinotti, & Vecorena, 2013).     

Individual needs and social pressure: Evidence on the Easterlin hypothesis using repeated cross-section surveys of Canadian households

This paper provides additional evidence, using time-series and cross-sectional Canadian survey data, for the Easterlin hypothesis of an important income elasticity of individual needs. Our analysis is based on the regression of a minimum income to satisfy needs equation derived from a simple utility maximization framework. Moreover, our specification allows computing the Arrow-Pratt relative risk-aversion index and the Intertemporal Rate of Substitution. Our results are robust to different estimation methods dealing with the endogenous nature of income. We also compute poverty rates using our estimated equation parameters and standard OECD measures of poverty and find that some subjective measures are relatively close to the OECD measures.     

Tax cuts and enterprises’ R&D intensity: Evidence from a natural experiment in China

This paper studies the impact of tax cuts on enterprises’ R&D intensity. We use a natural experiment involving China’s business tax changing to value-added tax (“BT to VAT”) to identify any causality. The results reveal that this tax reform has prompted enterprises to increase their research and development (R&D) investment. Specifically, a stronger ability to transfer tax, results in this change having a more significant promotional effect on enterprises’ R&D intensity. Further analysis demonstrates that firms with different ownership types and in different industries respond differently to the “BT to VAT” policy. Our findings are only significant for non-state-owned and other modern service enterprises. This paper provides a theoretical and empirical basis for detailed analyses of the effects of “BT to VAT” policy, particularly the government’s subsequent improvement to the tax reform policy, to further stimulate enterprise investments in R&D as well as industrial upgrading.     

Foreign direct investment and exports The experiences of Vietnam1

We examined the implementation statuses of a total of 5,919 foreign direct investment (FDI) projects approved by the Vietnamese Ministry of Planning and Investment since 1988, and compiled a database of actually disbursed FDI in Vietnam. The database covers FDI flows into Vietnam from 23 countries from 1990 to 2004. Using the data, we analyzed the impact of FDI on the exports of Vietnam with gravity equations. The empirical results demonstrate that FDI is one of the major factors driving the rapid export growth of Vietnam. It has significantly facilitated the expansion of Vietnam's exports to FDI source countries. In particular, the empirical analysis shows that a 1 percent increase in FDI inflows will be expected to give rise to a 0.13 percent increase in Vietnam's exports to these countries.     

Can microcredit reduce vulnerability to poverty? Evidence from rural Vietnam

Extant literature has extensively explored microcredit's impacts, confirming its essential role in poverty alleviation. However, most studies focus on poverty measures that exclusively emphasize current poverty status without adequately addressing the potential of falling into or remaining in poverty. Furthermore, the role of credit services in helping the poor in rural areas appears to be underexamined in the literature. To address this knowledge gap, this study investigates whether rural microcredit can reduce household vulnerability to poverty. A theoretical framework is developed to capture the mechanism by which microcredit borrowing has a vital role in household businesses and impacts the probability of being poor in the future. The Vietnam Access to Resources Household Survey data set from 2008 to 2016 is used to explore this issue. The findings indicate that rural Vietnam's access to microcredit significantly reduces vulnerability to poverty. Moreover, better-off households are seemingly the most effective at using microcredit, whereas the opposite is found among worse-off households. These results are found to be robust using the propensity score matching method.     

Compliance and multidimensional firm performance: Evaluating the efficacy of rule-based code of corporate governance

This study seeks to evaluate the efficacy of the Pakistani Code of Corporate Governance by finding out its impact on firm's performance and efficiency. This exploration is done in the context that Securities & Exchange Commission of Pakistan's choice of corporate governance regulations is heavily influenced by Anglo-Saxon approach, whereas de-facto realities of Pakistani corporate environment are quite in contrast.Using a panel data of 119 firms for the period of 8 years i.e. 2003 to 2010, and using a multidimensional performance framework i.e. financial performance and technical efficiency, we find that the extent of compliance has increased since the issuance of code in 2002. After controlling for firm size, growth, dividend payout, age and leverage, we find significant positive impact of compliance on firm's performance (ROA, ROE and ROCE). We also find a weak positive relationship between compliance and technical efficiency. We suggest that compliance is not linearly related with financial performance and we find that high compliant firms are less profitable than average or low compliant firms. This implies that one-size-fit all approach along with mandatory compliance is a questionable approach for Pakistani firms.This study is first in Pakistan in providing empirical evidence on efficacy of the rule-based Code of Corporate Governance and also adds to growing but underdeveloped literature on compliance and firm performance in emerging/developing economies. Further, this study offers insight to policy makers on the efficacy of current corporate governance regulations and offers a research framework for assessing the extent of compliance, effectiveness and economic impact of code of corporate governance.     

On the measurement and analysis of aggregate economic activity for China: the coincident economic indicators approach

This paper reviews some of China's high-frequency economic indicators and our principal findings on their selection and use. Our aim is to develop a composite index of coincident economic indicators (coincident economic index, CEI) which can be used to obtain timely information on the present state of the China's economy and provide an appropriate measure to analyze China's short-term macroeconomic dynamics. Notably, combining industrial production, retail sales, manufacturing employment, income of financial institutions and passenger traffic volume, they work well as the method for dating business cycles for China. It shows that, over the past two decades, there was one marked recession which occurred in 1988:8 to 1989:12. In addition to this business cycle chronology we also develop a growth cycle chronology based on the deviations from trend of the CE which shows that there have been four cyclical slowdowns since 1986. Whereas GDP growth lacks cyclical movements and appears to be dominated by trend and irregular movements, in contrast to GDP, the CEI works well as a measure of cyclical dynamics and can contribute to the analysis of short-term fluctuations of Chinese economic activity relative to its long-term growth.     

Tourism Taxes: Implications for Tourism Demand in the UK

Before one can understand tax implications for the tourism industry, one must understand the sensitivity of tourism demand. Using a recently developed theoretical framework, we model inbound tourism demand in the UK. The results suggest that tourism demand in the UK is very price sensitive and that measures which result in increasing tourism prices will have a significant negative impact on tourist arrivals. It is believed that a reduction in the VAT rate could boost UK's tourism sector, depending on the extent to which a decrease in taxation is passed on in the form of price reductions. The results also suggest that arrivals from neighboring countries are 98% higher than from distant origins; however, expenditure per capita of the former is 52% lower than the latter. We also found that common language between the origin and the destination increases arrivals 7% more than non‐native English‐speaking origins.     

Has Nguyen Phu Trong's Leadership Curbed Economic Reform? Economic Reform Trends in Vietnam

This paper argues how the features of Vietnam's political‐administrative system and their recent changes have affected economic reform, particularly reform of state‐owned enterprises. After the 12th Party Congress in 2016, the Party Secretary General Nguyen Phu Trong's administration has seemed to exaggerate its conservative and totalitarian‐looking rule in the political arena. In contrast, the economic reform policies introduced by Trong's administration seem more transformative and progressive. This paper suggests that this contradiction must indicate changes in the policies relating to the state management of economic entities and/or a disguised form of reform to retain state influence over economic management, both of which tend to end up with pervasive rent‐seeking practices.     

Growth maximizing government size,social capital,and corruption

Our paper intersects two topics in growth theory: the growth maximizing government size and the role of Social Capital in development. We modify a simple overlapping generations framework by introducing two key features: a production function à la Barro together with the possibility that public officials steal a fraction of public resources under their own control. As underlined by the literature on corruption, Social Capital affects public officials' accountability through many channels which also affect the probability of being caught for embezzlement and misappropriation of public resources. Therefore, in our endogenous growth model such probability is taken as a proxy of Social Capital. We find that maximum growth rates are compatible with Big Government size, measured both in terms of expenditures and public officials, when associated with high levels of Social Capital.     

Effects of exchange rate volatility on bilateral import performance of Vietnam: A dynamic Generalised method of Moments panel approach

The paper examines to what extent exchange rate volatility affects Vietnam’s bilateral import value. The two-step system generalized method of moments (GMM) was employed on panel data over a 10-year period. Exchange rate volatility was generated by two measures, including generalised autoregressive conditional heteroskedastic (GARCH) and moving standard deviation (MOVSD). A variety of diagnostic tests which ensure the consistency of GMM estimates were discussed. The main findings confirm that all explanatory variables demonstrated the expected signs, and exchange rate volatility has positive impacts on Vietnam's import flows. However, there is a large overall difference between the results produced with those two volatility measures.     

Regional distribution and dynamics of human capital in China 1985–2014

This study investigates the regional distribution and dynamics of human capital in China. We develop a new comprehensive human capital measure based on the Jorgenson-Fraumeni (J-F) lifetime income framework, in addition to using the traditional education-based human capital measures. We find that the new J-F human capital measure reflects more closely the regional economic disparity than the education-based measures. We also conduct a Divisia decomposition analysis to investigate the contributions of different factors to the quantity and quality growth of human capital and to regional disparity. Our results show that the regional human capital gaps in China are enlarging in general. Education and urbanization contribute most to human capital growth, while population aging shows a strong negative effect. Our estimates create a new provincial level human capital panel dataset from 1985 to 2014, which is useful for empirical work and policy analysis.     

The effects of labor regulation on firms and exports: Evidence from Indian apparel manufacturing

We examine the impact of labor regulations on firm outcomes and explore their differential effects on exporters. Building on a conceptual framework developed from standard theory and a detailed qualitative study of India's apparel industry, our econometric analysis exploits establishment-level data on formal Indian garment manufacturers between 2009-10 and 2013-14 and interstate variation in labor laws. We find a close fit between the implications of our conceptual framework, the qualitative evidence and the data. Apparel producers in states with pro-worker labor regulations tend to replace labor with capital. This choice of technique effect is smaller for exporting firms, which are more tightly bound to norms for organizing production in global supply chains. Pro-worker labor regulations also reduce output levels more for exporters than for non-exporters, consistent with exporters being bound to international pricing norms. Labor regulations thus have a particularly adverse impact on exporters. Our findings underscore the cost of poorly-designed and implemented labor regulations in a labor-abundant country wishing to spur exports, employment and industrial activity in labor-intensive industries.     

Imperfect Tax Compliance and the Optimal Provision of Public Goods

Our aim in this paper is to investigate whether the presence of imperfect income tax compliance affects the optimal provision of public goods within a framework in which public expenditure is financed by a general income tax that also accomplishes redistributive goals. We first derive the income tax structure, and then a generalized Samuelson rule. We argue that, under imperfect income tax compliance, it is desirable to distort public–good supply downwards, in the sense that the sum of marginal rates of substitution between public and private consumption must exceed their marginal rate of transformation.     

Is the emerging non‐farm market economy the route out of poverty in Vietnam?

Are the household characteristics that are good for the transition to a more diversified market‐oriented economy in Vietnam also important for reducing poverty? Or are there trade‐offs? The determinants of both poverty incidence and participation in rural off‐farm activities are modeled as functions of household and community characteristics using comprehensive national household surveys for 1993 and 1998. While there are some common causative factors, such as education and region of residence, the processes determining poverty and inhibiting diversification are clearly not the same. Participation in the emerging rural non‐farm market economy will be the route out of poverty for some, but certainly not all, of Vietnam's poor.     

Differentiating Between Dimensionality and Duration in Multidimensional Measures of Poverty: Methodology with an Application to China

We develop a multidimensional poverty measure that is sensitive to the within‐individual distribution of deprivations across dimensions and time. Our measure combines features from a static multidimensional measure (Alkire and Foster, 2011a ) and a time‐dependent unidimensional measure (Foster, 2009 ). The proposed measure separately identifies—and can therefore be decomposed according to—the proportion of the poverty score attributable to: (i) the concentration of deprivations within periods; (ii) the concentration of deprivations within dimensions. In doing so it allows for a poverty ranking that is robust to assumptions about the trade‐off between the two components. Previous measures have not allowed for the features proposed here due to the inability to calculate the exact contribution of each dimension to overall poverty. We overcome this by adapting to our measure the Shapley decomposition proposed in Shorrocks ( 2013 ) (based on Shapley, 1953 ). The measure is applied to data from China, 2000‐2011.