The impact of productivity on export transitions: revisited evidence from the Vietnamese manufacturing sectors

The effect of total factor productivity (TFP) on exports particularly interests policy-makers and economists, but empirical evidence is ambiguous. This paper uses the 6-wave panel data in 2010-2015 to investigate the impact of TFP on export transitions at the firm level. We distinguish different types of export transitions, namely start, stop, continuity, fluctuation, and striving, and different phases of export transition. The Generalised Method of Moments (GMM) estimation is applied to control for endogeneity and unobserved time-invariant specific components. The results reveal that (i) the effect of productivity on export (the self-selection hypothesis) is heterogeneous, depending on specific sectors and types and phases of export transitions; (ii) productivity growth does not necessarily result in positive effects on and lead to participation in types and phases of export transitions. Our results also reveal strong evidence of favourable sunk cost in long-run export striving in nearly all sectors, and unlike previous studies, empirical results show a negative effect of sunk cost in some manufacturing sectors. Policy-makers should create dynamic comparative advantages and favourable environments for new exporters, focus the relevant policies on productivity stimulus, and strengthen the likelihood of survival for the domestic firms in the competitive global markets.