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Macroeconomic Growth in Vietnam Transitioned to Market: An Unrestricted VES Framework

Institute for Research Science and Banking Technology, Banking University HCMC, 39 Ham Nghi, District 1, Ho Chi Minh City 71010, Vietnam
Economies 2020, 8(3), 58; https://doi.org/10.3390/economies8030058
Received: 11 June 2020 / Revised: 3 July 2020 / Accepted: 9 July 2020 / Published: 16 July 2020
(This article belongs to the Special Issue The Application of Time Series Analysis in Economic Growth)
The Vietnamese economy has increased at high speed over the transformation decades; however, most recent studies on the economic growth of this country used the Cobb-Douglas or CES (Constant Elasticity of Substitution) production functions, which are unable to explore the relationship between the elasticity of capital-labour substitution and development process, and hence, are not relevant to accessing a dynamic economic system. For that reason, this study is conducted to specify an unrestricted VES (Variable Elasticity of Substitution) production function in a one-sector growth model of Vietnam, highlighted by two characteristics: successful transition from plan to market and rapid progress. The VES is given preference over the CES and the Cobb-Douglas having the elasticity of substitution between capital and labour varying with economic development. By employing a Bayesian nonlinear regression through MCMC methods, the study reported the following findings: (1) the above-unity variable elasticity of capital-labour substitution in an aggregate unrestricted VES function specified for Vietnam shows that the model generates the possibility of endogenous economic growth; (2) the capital share tends to increase, while the labour share faces a downward trend along with the development of Vietnam; (3) the VES is empirically proven through a Bayes factor test to be superior to the CES and Cobb-Douglas for analysis of the growth process of Vietnam, an emerging transition economy. View Full-Text
Keywords: Bayesian nonlinear regression; elasticity of substitution between capital and labour; transition; unrestricted VES Bayesian nonlinear regression; elasticity of substitution between capital and labour; transition; unrestricted VES
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MDPI and ACS Style

Ngoc Thach, N. Macroeconomic Growth in Vietnam Transitioned to Market: An Unrestricted VES Framework. Economies 2020, 8, 58.

AMA Style

Ngoc Thach N. Macroeconomic Growth in Vietnam Transitioned to Market: An Unrestricted VES Framework. Economies. 2020; 8(3):58.

Chicago/Turabian Style

Ngoc Thach, Nguyen. 2020. "Macroeconomic Growth in Vietnam Transitioned to Market: An Unrestricted VES Framework" Economies 8, no. 3: 58.

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