Capital misallocation and state ownership policy in Vietnam

Crawford School of Public Policy
Photo by anhtu on Flickr

Event details

PhD Seminar (Econ)

Date & time

Friday 04 December 2020


Online via Zoom


Phan Le

This paper examines capital misallocation in manufacturing firms in Vietnam from 2008—17. Three sources of capital misallocation are investigated: adjustment costs, uncertainty, and policy distortions. The findings reveal a modest contribution of adjustment costs to total misallocation. In contrast, policy distortions account for 81 percent of capital misallocation in Vietnam and lead to an aggregate total factor productivity loss of 110 percent in the manufacturing sector relative to the undistorted first-best level. The paper examines one specific type of policy distortions – preferential treatments of state-owned enterprises – and finds that these policies cause a 38-percent loss in aggregate manufacturing total factor productivity.

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