Macroeconomic growth in Vietnam transitioned to market: An unrestricted VES framework

Artikel

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Economies ; ISSN: 2227-7099 ; Volume: 8 ; Year: 2020 ; Issue: 3 ; Pages: 1-15 ; Basel: MDPI

Classification and Topics

• Classification: Wirtschaft
• Subject: Bayesian nonlinear regression ; elasticity of substitution between capital and labour ; transition ; unrestricted VES

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Nguyen Ngoc Thach
• Event: Veröffentlichung
• (who): MDPI
• (where): Basel
• (when): 2020

Further information

• DOI: doi:10.3390/economies8030058
• Handle: http://hdl.handle.net/10419/257107
• Last update: 10.03.2025, 11:42 AM CET