MINISTRY OF EDUCATION AND TRAING
UNIVERSITY OF ECONOMICS HCMC
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DAO VU PHUONG LINH
LABOR PRODUCTIVITY OF VIETNAM ENTERPRISES
MAJOR: DEVELOPMENT ECONOMICS
CODE : 9310105
PH.D. DISSERTATION
EXECUTIVE SUMMARY
HO CHI MINH CITY 2020
The thesis was complete at:
University of Economics Ho Chi Minh City
Supervisor: 1. Dr. Ph m Khanh Namạ
2. Dr. Le Van Chon
Reviewer 1: ...........................................................................................................
Reviewer 2: ............................................................................................................
Reviewer 3: ............................................................................................................
The Thesis will be presented to the University Dissertation Board at: ..................
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At hours day month year
The thesis can be found at the library:
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CHAPTER 1 INTRODUCTION
1.1 Background and research gap
1.1.1 Practical background
In the 1990s of the 20th century, Vietnam's economy experienced a remarkable growth
mainly from the increase in labor productivity in agriculture. This is the result of the process of
dissolution of cooperatives and the transfer of land use rights to the private sector.
Despite being clearer and more stable progress than some other countries, Vietnam is
continuing to face new challenges. Economic growth and the transition from agriculture to
other sectors have shown signs of slowing down, with low per capita income (Vu,
2016).Productivity growth has been a key factor for Vietnam's economic growth in the early
years of innovation, which has slowed down over the past decade, and the growth rate of labor
productivity has gone down (Nguyen and Kenichi, 2018).Instead of improving labor
productivity to continue to achieve achievements, capital investment becomes the main source
of economic growth in this next period. But according to Bodewig and Magnusson (2014), this
is not a sustainable model, suitable for Vietnam to ensure a high growth rate is maintained.
Although considered as one of the countries with the best labor productivity growth in the
region, when comparing internationally according to the report of the International Labor
Organization (ILO, 2015) and ADB on the labor productivity of ASEAN 2014, Vietnam's labor
productivity was only 1/4 of Thailand, 1/5 of Malaysia, 1/10 of South Korea and 1/15 of
Singapore.
The most commonly used methods to increase labor productivity in Vietnam today is to
increase technology through opening the economy, in particular, attracting foreign direct
investment and encouraging businesses. Domestic enterprises export or increase labor
productivity through basic wage increase policy. However, the achievements have not been as
expected as evidenced by the results of labor productivity mentioned above.
In order for the labor force to become more productive, it is necessary to consider the labor
force in the enterprise system because it is the place that holds the majority of the country's
labor force. The business system and the private sectors are an extremely important part and the
main driver of Vietnam's economic growth (WB, 2014).
According to a report of the Ministry of Planning and Investment (2019) on the productivity
and competitiveness of Vietnamese enterprises, Vietnam's current labor productivity in the
recent period is largely contributed by the Internal application ”(1). Therefore, analyzing the
determinants of labor productivity from an enterprise perspective, assuming that the main
component of the "intra-industry effects" in the increase of labor productivity is very important.
1.1.2 Theoretical background
Labor productivity growth plays an important role in enterprise survival, growth, and
development and has a decisive influence on economic growth (Breu et al., 2012). Therefore,
there is a lot of researches in both theory and experiment from many micro and macro
perspectives to study the factors affecting labor productivity. Because of the desire to focus on
improving labor productivity for the private sector, businesses, in the context of theory, the
thesis only presents studies on factors affecting labor productivity under the micro-scale.
Regarding the relationship between FDI and export to labor productivity from an enterprise
perspective, the first studies are Vernon (1966), Caves (1974), Findlay (1978), Dunning (1979).
then Blomstrom (1986), (Griffith et al., 2002), Vadlamannati (2011), Georgescu (2012),
Bernard and Jensen (1999), Blalock (2004), Wagner (2007), Haidar (2012), De Loecker (2013).
Classic theoretical models such as those of Swan (1956); Solow (1957) merely considered
foreign direct investment (FDI) as an important capital supply channel for the economy, the
later empirical studies when researching from micro perspective also showed that capital flows
FDI flowing into the interior of a country will lead to technology transfer, increasing
productivity for its domestic companies (Aitken and Harrison, 1999; Griffith, 2002; Ng, 2007).
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FDI firms, especially multinational companies, are an important tool in technology
application because they offer outstanding technological advantages. In addition to direct
impacts on the economy, FDI enterprises can indirectly create long-term impacts on the
manufacturing industry in the host country (Caves Model, 1974).
However, multinational companies may also reduce the labor productivity of host countries
(Rodriguez-Clare, 1996). The evidence of these studies is that multinational companies affect
host countries through backward and forward links and other effects
Another technology application channel that also affects labor productivity is through
international trade, especially export. Most current theories and applied studies suggest that
exports have a positive impact on labor productivity (World Bank 1993; Metliz 2003; Bernard
et al 2003). However, some studies such as Young (1991) show that a freer trading regime
slows the growth of labor productivity of developing countries due to the lack of comparative
advantage internationally. Therefore, the effects of exports on the labor productivity of
developing countries may vary.
Although both FDI and exports may influence technological spillovers that affect labor
productivity, most of the studies in Vietnam (Nguyen, 2019; Pham, 2008; Le, 2007, Newman et
al. (2017) noted the technological diffusion of FDI or exports to labor productivity as two
separate channels without considering simultaneously the impact of FDI and export to labor
productivity of enterprises as two channels of technological diffusion. international competition
and their differences to business objects with different levels of capital.
The relationship between welfare or remuneration policies and labor productivity has been
strengthened in economic theory (demand theory (Maslow, 1954); expectation theory (Vrom,
1964); two-factor theory ( Herzberg, 1987), and a number of other theories). Many empirical
research results (Dreher et al., 1988; Micelli and Lane, 1991; Millea, 2002; Tsai and Yu, 2005;
Singh, 2009; Anand et al., 2010) demonstrate that labor benefits, it contributes positively to the
labor productivity of employees and the health of employees have a positive impact on labor
productivity and the health of the national economy. These benefits strongly influence the
behavior of employees, which is a compelling reason to help employees continue to work for
business owners as well as they are forced to compete with each other and this will lead to
increased labor productivity of enterprises. Disagreeing with this view, some studies suggest
that welfare regimes are only seen as a factor to regulate and provide financial support for
employees because they are members of an organization or a business, not a motivator. or
forces related to labor productivity (Rosenbloom and Hallman, 1981; Hills, 1987; Adigun and
Stephenson, 1992; Mondy et al., 2002).
1.1.3 Research gap
Research on labor productivity is important for both public policies and decisions for the
private sector (Sauermann, 2016) because this is an substantial indicator reflecting the
economic development effectiveness of national, enterprise and employee quality. Especially
with the context of Vietnam, in the past two decades, although Vietnam's labor productivity has
increased rapidly, it is still near the bottom of ASEAN’s. If this growth rate is maintained,
Vietnam will have to spend 10 to 50 years to catch up with other countries in the region (ILO,
2015).
Promoting labor productivity of the economy should first boost the productivity of
enterprises. There are three main groups of factors that help determine labor productivity:
human capital, technological progress, and economic size (Greelaw et al., 2018). A better
understanding of how these factors affect labor productivity helps businesses generate greater
profits, increase productivity, add investment opportunities, and reduce costs (ILO, 2015). In
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this thesis, special attention for the two channels affecting labor productivity: technological
progress through economic integration, human capital through employee welfare.
Vietnam is becoming more and more deeply integrated into the economy, so there have been
many domestic studies on the influence of foreign technology application channels through FDI
and export to productivity (Nguyen & Nguyen, 2012; Ngo, 2017; Pham, 2018). However, most
of these studies have investigated channels that impact on discrete labor productivity without
considering them as competing channels of competition
Businesses with different levels of capital intensity will have different pursuit strategies
when they want to join the globalization mechanism. Selecting which strategies to participate to
get the best benefits is also a problem for SMEs in the current stage of globalization.
The second channel affects the labor productivity that the thesis is interested in here is
human capital through employee welfare policy. Remuneration policies which have been
primarily studied in Vietnam, remain wage issues and have been ineffective in recent years,
while remuneration policies have been associated with intangible or non-financial rewards. it is
impossible or not easy to copy and copy to create human resources advantages for the
organization that has not been paid enough attention.
1.2 Research objectives
The overall research objective of the thesis is to analyze the impact on the labor
productivity of Vietnamese enterprises through direct investment, exports, and labor benefits.
Objective 1: Analyze the impact of 2 channels of technology application, foreign direct
investment, and export to labor productivity in enterprises with different levels of capital
intensity;
Objective 2: Assess the impact of labor benefits on labor productivity of Vietnamese
SMEs.
1.3 Research question
Question 1: With the difference in capital intensity, is there a difference between the
impact of FDI and exports on the labor productivity of Vietnamese enterprises?
Question 2: How does labor benefit affect the labor productivity of Vietnamese SMEs?
1.4 Scope and subjects of the research
1.4.1 Subjects of the research
The main research subjects of the thesis include labor productivity of enterprises in relation
to FDI and export in terms of characteristics of the capital intensity of different industries; labor
productivity in relation to employee welfare policies.
1.4.2 Scope of the research
Overall the thesis studies issues surrounding labor productivity of Vietnamese enterprises
from 2009 to 2016.
Enterprise scope: including large enterprises and SMEs with the first goal and focused on
SMEs with the second goal.
Area/sector of the enterprise: Enterprises with different types of ownership in the
manufacturing and processing industry.
1.5 Research Methodology
To solve two objectives, the thesis uses the FEM model and the REM model to process the
research model estimated table data. These methods allow control of unobserved fixed effects
of the company (Wooldridge, 2002).
To solve the research goal No. 1, the thesis uses a combination of data sets from 2 Vietnam
Enterprise Census data (VES) in 2015 and 2016.
