The effect of manufacturing growth in Vietnam: the test of Kaldor's first law

This study aims to examine the effect of manufacturing growth by testing Kaldor's first law. The contributions of this study are as follows: (1) testing the effect of Kaldor's first law while considering Vietnam's recent manufacturing development, (2) clarifying which industries have the weakest effect, and (3) proposing a policy direction to expand the effect to the entire Vietnamese economy. The empirical analysis identified that the effect on the service industry is lower than that in other key Southeast Asian countries, as Vietnam's foreign dependency on the service industry for manufacturing exports is higher than theirs. To maximise this effect, the Vietnamese government should encourage the development of a support industry related to manufacturing and appeal to multi‐national corporations for investment.