Contribution of Total Factor Productivity to Economic Growth of Two Reforms: Vietnam and China

Today, Vietnam and China are becoming known around the world as two of the most successful examples of economic transformation in recent history. Started in the early 1980s, the economic reform has gained considerable achievements. This study evaluates and compares the contribution of Total Factor Productivity (TFP) to the economic development of Vietnam and China as a paired case study. Based on the neo-classical theory of economic growth, it attempts to analyze:

(i) the contribution of TFP to economic development of each country;
(ii) the overall assessment and the differences in the growth experience of two economies; (iii) some theoretical explanations for these results and;
(iv) identifying some possible determinants of TFP.

The study finds out that:

(i) TFP played an important role in the economic growth of Vietnam and China since the 1980s and especially in later years, contributed to their GDP growth 30.4% and 22.6% respectively;
(ii) FDI is significant major factor explaining the Vietnam’s TFP growth from 1980 to 2000;
(iii) business fluctuation affects the estimation of the Vietnam and China’s TFP growth considerably and;
(iv) accumulation of capital was the dominant factor that contributed to economic growth of Vietnam and China with 54.1% and 60.5% respectively.