Journal
REGIONAL STUDIES
Volume 57, Issue 9, Pages 1681-1713Publisher
ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
DOI: 10.1080/00343404.2022.2155297
Keywords
trade liberalization; World Trade Organization (WTO) accession; local business environment; firms' productivity; Vietnamese micro-level data
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This paper examines how frictions in the local business environment can affect the productivity gains from trade. Using Vietnamese firm-level data, the analysis finds that trade opening has a positive effect on firms' efficiency. However, local market constraints such as unenforceable property rights, an ineffective land-titling system, bureaucratic hurdles, and labor market frictions play a crucial role in the transmission of trade liberalization shocks. These findings have important policy implications, suggesting the need for complementary policies to address local market constraints alongside trade reforms.
This paper examines how frictions in the local business environment where firms operate alter the productivity gains from trade. Using Vietnamese firm-level data from 2006 to 2012, the analysis provides robust evidence of a positive effect of trade opening on firms' efficiency. However, distortions that operate through certain local market features in the form of unenforceable property rights, an ineffective land-titling system, bureaucratic hurdles and labour market frictions play a crucial role in the transmission of trade liberalization shocks. These findings have important policy implications because they suggest that complementary policies addressing local market constraints need to be implemented alongside trade reforms.
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