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

102 Pages Posted: 15 Sep 2017

See all articles by Leonardo Baccini

Leonardo Baccini

McGill University

Giammario Impullitti

University of Nottingham

Edmund J. Malesky

Duke University, Political Science

Date Written: August 28, 2017

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.

Keywords: state capitalism, state-owned enterprises, trade liberalization, heterogeneous firms, gains from trade, WTO, Vietnam

JEL Classification: F120, F130, F140, P310, P330

Suggested Citation

Baccini, Leonardo and Impullitti, Giammario and Malesky, Edmund J., Globalization and State Capitalism: Assessing Vietnam's Accession to the WTO (August 28, 2017). CESifo Working Paper Series No. 6618. Available at SSRN: https://ssrn.com/abstract=3036319

Leonardo Baccini

McGill University ( email )

1001 Sherbrooke St. W
Montreal, Quebec H3A 1G5
Canada

Giammario Impullitti (Contact Author)

University of Nottingham ( email )

University Park
Nottingham, NG8 1BB
United Kingdom

Edmund J. Malesky

Duke University, Political Science ( email )

140 Science Drive (Gross Hall), 2nd floor
Duke University Mailcode: 90204
Durham, NC 27708-0204
United States

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