Impacts of logistics on Vietnam’s exports: A stochastic frontier gravity analysis

Abstract

Over the past two decades, export-related activities have contributed nearly half of Vietnam’s GDP, playing a crucial role in economic growth. This study examines the impact of logistics on Vietnam’s exports while addressing unobserved trade inefficiencies overlooked in previous research. Using a stochastic frontier gravity model on trade flows from Vietnam to 159 importing countries between 2007 and 2022, the analysis confirms the significant presence of export inefficiencies. By constructing a bilateral logistics variable based on the World Bank’s Logistics Performance Index (LPI), the study finds that logistics development has a significant positive effect on both actual and potential exports, with the latter exhibiting a greater impact. These findings remain robust after controlling for time-specific external shocks and interpolating missing LPI values within the study period. The results reinforce the strong linkage between logistics and exports, highlighting logistics development as the most effective strategy for enhancing Vietnam’s export performance. Despite previous achievements, further investment in logistics infrastructure and the logistics sector is recommended to maximize export potential.