Does exporting spur firm productivity? Evidence from Vietnam

This study uses data on Vietnamese manufacturing firms from the World Bank Enterprise Surveys for the period 2002-08 to examine causality between export participation and firm productivity. The analysis focuses on the three hypotheses related to the relationship between exporting and firm productivity that have received attention in the literature, namely: self-selection; learning-by-exporting; and core competence hypotheses. In this case study, evidence is found in support each of these hypotheses, which are often portrayed as competing with each other but are in fact complementary. It is found that comparative advantage, which in the case of Vietnam - a labour-abundant, low-wage country - is in labour-intensive products, is central to understanding each of the three hypotheses. The firms that have relatively high productivity (ex ante) and accordingly self-select to export are those that produce in line with Vietnam's comparative advantage (i.e., firms that are relatively labour-intensive). Firms that experienced a relatively large increase in export intensity are found to have experienced higher total factor productivity, supporting the learning-by-exporting hypothesis, and a relatively large increase in labour intensity, supporting the core competence hypothesis and the central role of comparative advantage.