Thesis Public Defense | VNP29 - Đỗ Như Nam

Productivity-based capital allocation efficiency: Empirical evidence from households in Vietnam

Student: Đỗ Như Nam, VNP-29

Supervisor: Dr. Võ Hồng Đức

Abstract:

The research studies the household production model and credit program efficiencies in Vietnam. We extend prior empirical studies on Vietnam’s financial inclusion by focusing on credit constraint aspects through examining potential credit misallocation with respect to household productivity. We hypothesize that the ineffective allocation of credit results in lowered levels and reduced welfare impacts of financial inclusion, hence widening the inequality gap through production loss. Our methodology entails measuring households’ TFP through robust estimation of the household production function, specified in trans-log terms, then applying fitted Total Factor Productivity (TFP) to a Heckman’s two-step sample-selection modeling framework. The empirical strategy serves to understand households TFPs’ impact on credit program participation and amount granted, or, in other words, credit elasticities to TFPs. We find that the studied credit programs exhibit positive  efficiencies, albeit reveal certain mistargeting challenges that could be enhanced in the screening and allocation process. The study aims to contribute a new perspective on barriers to financial inclusion in Vietnam, by focusing on productivity’s potential impact on credit, which in turn facilitates production and welfare.

JEL Classification: D13, D24, D61

Keywords: financial inclusion, capital allocation, household production, total factor productivity, sustainable development.