# IV. Data

This study uses a firm-level unbalanced panel dataset from the Vietnam Economic Survey over the 20092016 period. The Vietnam Economic Survey is conducted annually by the Government of Vietnam’s General Statistics Office (GSO) and covers all manufacturing and services enterprises in the country with more than 20 employees and a representative sample of firms with fewer than 20 employees. Tax codes were used as a time-invariant identifier of firms.

Several steps were taken to clean the data prior to analysis. First, Only manufacturing firms were considered for analysis given that the cost of goods sold (COGS) is more easily interpretable as materials costs within manufacturing than in services. In addition, firms with missing or invalid financial data (namely turnover, total assets, cost of goods sold, and employment) were excluded, as were firms with invalid or missing tax codes. Third, Micro-firms with fewer than 10 employees were excluded as production function estimation is not reliable at such low levels of employment. Finally, firms with outlier or unreasonable markup estimates (less than zero or over three) were removed from the data set.<sup>7</sup> The resulting data set thus includes 117,363 observations with markup estimates across 35,659 firms over the 2010-2014 period and 2016. Information from 2015 was excluded due to incomplete cost of goods sold data, while markup estimates could not be made for 2009 (the earliest year of the data set) as markup estimates rely on lagged data (see discussion in the methodology section).

In addition, the data from the Vietnam Economic Survey were supplemented with further national and global data for analytical purposes. Input and output deflator data at the Vietnam Standard Industrial Classification (VSIC) two-digit level were sourced from the GSO, while input-output tables for Vietnam were sourced from the Asian Development Bank (ADB). Finally, fixed capital deflators were obtained from the Food and Agriculture Organization (FAO).

## Descriptive statistics

Table 1 displays summary statistics of various firm characteristics used for markup estimation and measures of markups and firm profitability. For firm _i_ in year _t_ , Outputi,s,t is defined as deflated revenue; Employmenti,s,t denotes total employees at the end of year; Capitali,s,t denotes deflated total assets at the beginning of year; Materialsi,s,t denotes deflated cost of goods sold (COGS); MNEi,s,t is a dummy variable equal to one if the firm is foreign-owned; SOEi,s,t is a dummy variable equal to one if the firm is state-owned; and Yi,s,t is markup defined as price divided by marginal cost. According to the legal information reported in the survey, a firm is considered foreign-owned when it is a joint venture between foreign owners and other private proprietors or is 100% foreign-owned.

Firm-year observations vary widely in terms of their size whether measured in terms of revenue, employees, capital, or materials cost. Average estimated markups are greater than one, signifying that

> 7 Negative markups are implausible as they require prices or marginal costs to be negative. The high-end cutoff of three was selected as it implies very high gross margins in excess of 75 percent that are seldom seen in practice at this level of aggregation. While this cutoff is somewhat arbitrary, we show in Section VI that our results are robust to different levels of cutoffs. Overall, such outliers account for 2 percent of markup estimates assuming a CobbDouglas production function and under 1 percent of estimates assuming a translog production function. Outliers correspond to 1 percent or fewer of all translog estimates, although they are somewhat more common for within individual sectors for Cobb-Douglas estimates, with a maximum of 11 percent for the leather goods sector.

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