Analyzing Economy Wide Effects of Trade Liberalisation on Vietnam using a Dynamic Computable General Equilibrium Model

Abstract

Since its reform process in the late 1980s, Vietnam has emerged as a rapidly growing economy with growth rates surpassing its more developed ASEAN neighbours. This paper aims to consider the economy wide impacts of trade liberalisation on Vietnam. We approach this by way of multi-region, multi-good, dynamic growth computable general equilibrium (DCGE) model. We find that trade liberalisation has caused a large fall in wage inequality thus increasing the welfare of unskilled workers in Vietnam. There is also evidence of a shift away from agriculture towards low-tech and intermediate manufacturing sectors. Additionally, there are significant gains in terms of large physical and human capital accumulation.