Diversification strategies and firm performance in Vietnam

This paper is based upon the assumption that a firm's profitability is determined by its degree of diversification which is, in turn, strongly related to the antecedent decision to carry out diversification activities. This calls for an empirical approach that permits the joint analysis of the three interrelated and consecutive stages of the overall diversification process: diversification decision, degree of diversification and outcome of diversification. We apply parametric and semi‐parametric approaches to control for sample selection and the endogeneity of the diversification decision in both static and dynamic models. For the analysis, we use the census dataset on the whole firm population in Vietnam, as a representative of transition countries. After controlling for industry fixed‐effects, the empirical evidence from the firm‐level data shows that diversification has a curvilinear effect on profitability: it improves firms’ profit up to a point, after which a further increase in diversification is associated with declining performance. This implies that firms should consider optimal levels of product diversification when they expand their product offerings beyond their core business. Other noteworthy findings include the following: (i) the factors that stimulate firms to diversify do not necessarily encourage them to extend their diversification strategy; (ii) firms that are endowed with highly technological resources and innovation investment are likely to successfully exploit diversification as an engine of growth; and (iii) while industry performance does not have a strong influence on the profitability of firms, it impacts their diversification decision as well as the degree of diversification.     

Econometric estimation of a global spillover matrix for wheat varietal technology

An econometric approach using international and national yield trial data is employed to estimate a spillover matrix for wheat varietal technology. The global spillover matrix is estimated based on international yield trial data from 1979–80 to 1987–88, that include 195 international trial locations and 209 wheat varieties. The locations were classified across countries using the CIMMYT's wheat megaenvironment system and varieties were classified by both their environmental and institutional origin. The model gave good explanatory power and confirmed the location specificity hypothesis, at least, for the varieties developed by national programs (NARS). The spillover matrix shows that NARS varieties developed in the home' environment generally perform better on average than varieties developed in other megaenvironments. Also, the matrix is not symmetric. CIMMYT varieties perform better on average in irrigated and high rainfall environments than NARS varieties developed for these environments. The yield advantage of CIMMYT varieties in many test megaenvironments indicates the potential of CIMMYT varieties to spill-over to these test megaenvironments. Results also indicate that national programs are efficient in selecting from among imported technologies. Analysis of international data is complemented by the analysis of country-level data for Pakistan and Kenya that confirms the above results. The country-level analysis, however, indicates that CIMMYT germplasm does not do so well in some sub-environments, such as the irrigated short-duration environment. The results of the spillover matrix have implications for the design of crop breeding programs both at the national and international levels. Information provided by the spillover matrix can be utilized by national programs to deploy their resources more efficiently by following a mixed strategy of direct importation of technology in some environments and local development of technologies in other environments which are unique to the country.     

Optimal infant industry protection during transition to World Trade Organization membership – A numerical analysis for the Vietnamese motorcycle industry

This paper proposes a framework to derive the optimal dynamic path of tariffs to protect infant industries when a country initiates a process to join the World Trade Organization (WTO). The framework is based on the model of Melitz (2005) in which externalities associated with dynamic learning-by-doing provide a rationale for infant industry protection. Unlike the original model, this paper assumes that there is a time limit for protection: after a fixed number of years, tariffs are required to be constant over time at a low level. This setup reflects the nature of the actual WTO agreement. This model is solved analytically to derive quantitative implications for the optimal tariff path, unlike in Melitz (2005), where only qualitative analyses are undertaken. An interesting result emerges: conventional wisdom is that a country in this situation should reduce the tariff rate gradually over time so that it converges to its long-run rate at the terminal date of protection. By contrast, this paper finds that, in some plausible scenarios, the optimal time path of the tariff can be upward sloping. A numerical analysis applied to the Vietnamese motorcycle industry, a typical infant industry in a country joining the WTO, confirms such a pattern.     

Effects of income distribution on household income

The paper uses a complete model of price-independent-generalized-linear Engel equations with estimable income distribution effect parameter to compute average household income for twelve mutually exclusive groups of Australian families to highlight the bias of conventional weighted mean income published by national statistical offices for welfare analysis.     

Vietnamese Economy at the Crossroads: New Doi Moi for Sustained Growth

Thanks to doi moi, Vietnam was successful in escaping the poverty trap and emerged as a lower middle‐income country in the late 2000s. From that time, however, the Vietnamese economy entered a new phase, which has been characterized by slow growth, weak international competitiveness, and macroeconomic instability. Apart from short‐term problems associated with the management of increasing foreign capital, the major factors accounting for the difficulties of Vietnam's current economic phase can be attributed to the Vietnamese style of the gradualist strategy of transition from a planned to a market economy, which protects state‐owned enterprises, and consequently to the failure to respond to the rapid rise of China. For further industrialization and sustained growth, Vietnam should embrace a new doi moi that follows the efficient type of gradualist strategy, with a special focus on new reforms of state‐owned enterprises and a policy that promotes the country' s dynamic comparative advantage.     

亚洲高速公路，许东盟一个美好未来

由大湄公河次流域国家酝酿、亚洲发展银行投资兴建的亚洲高速公路虽然还未竣工，已经证明了其巨大的经济效益，并在很大程度上改变着这个区域。[编者按]     

Adaptive algorithms for maximizing overall stock return

Deciding which stocks to purchase and how to optimally allocate the total investment among them is a nontrivial task for every investor. In this article, we propose two adaptive techniques that would provide an optimal allocation maximizing the return over the investment period. The first approach is the adaptive power method (PM) which is a modification of the proper orthogonal decomposition method. The adaptive PM uses only the currently available information to compute the optimal allocations, yet its long-term solution approaches the dominant eigen solution, even though that solution would require having a priori knowledge of all stocks’ performance. The second approach is derived from the well-known Least Mean Square (LMS) method, where the optimal allocation can be computed by adaptively steering the overall return toward a desired value. The experimental results have indicated promising gains even when the general market trend is downward.     

Modelling value-added tax in the presence of multi-production and differentiated exemptions

We develop a framework for economy-wide modelling of value-added tax systems. Our framework models a number of complexities of VAT systems as implemented by tax agencies. In particular, we model multiple rates, multiple exemptions, multiple degrees of refundability across commodity users, and multi-product enterprises. We use our framework to model what is arguably South East Asia's most complex VAT system: that of Vietnam. We analyse the macroeconomic, industrial and distributional effects of simplifying Vietnam's complex VAT system. We simplify the system via a budget-neutral movement to one rate and removal of discretionary exemptions. This generates an aggregate welfare gain, but adverse distributional effects. Adverse distributional effects can be greatly ameliorated, at small cost to the aggregate welfare gain, via exclusion of paddy and rice from the VAT simplification program.