Oaxaca - blinder decomposition extended for the non-linear model to identify the ownership gap in the exit rate

Abstract

The purpose of this research is to identify factors to explain the gap in exit rate between state and non-state firms in Vietnam. With a sample of 7,962 Vietnamese firms and using the Oaxaca-Blinder decomposition extended for non-linear models, the research finds out that a very large part of the ownership gap in exit rate between state and nonstate firms cannot be explained by the included covariates, but it is almost explained by the effects of differences in the coefficients of covariates. In particular, the differences in coefficients of covariates of initial assets, the industrial sector (mining, construction and manufacturing industries), and the service sector considerably increase the ownership gap in exit rate, but the difference in the coefficient of initial employment reduces the ownership gap in the exit rate. Moreover, differences in explanatory variables between state and non-state firms explain a very small part of the ownership gap in exit rate. This means that an estimate of the reduction in state and non-state firms’ exit rates (resulting from giving non-state firms the same characteristics as state firms) is very small. The differences in coefficients have a much greater impact on differences in exit rates than characteristics that may be due to existing discrimination between state and non-state firms.