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

Over the past two decades, export-related activities have accounted for nearly half of Vietnam’s gross domestic product, pivotal in the country’s economic development and integration into the global trading system. Given the critical importance of exports to Vietnam’s economy, a substantial body of literature has examined various potential determinants of export performance. Among these, logistics is widely regarded as a key factor influencing trade outcomes. However, empirical studies investigating the relationship between logistics performance and Vietnam’s exports remain limited. Furthermore, existing research has primarily overlooked unobserved trade inefficiencies, which may significantly constrain export potential. This study addresses these gaps by applying a stochastic frontier gravity model, which enables the estimation of observable trade determinants while accounting for unobserved inefficiencies, to analyse the impact of logistics performance on Vietnam’s export flows. The model is estimated using the bilateral trade data between Vietnam and 159 importing countries from 2007 to 2022. A bilateral logistics variable is constructed using the World Bank’s Logistics Performance Index (LPI), reflecting the relative efficiency of logistics systems between Vietnam and its trading partners. The empirical results confirm the presence of significant export inefficiencies and demonstrate that improvements in logistics performance have a positive and statistically significant effect on actual and potential export values. Notably, the impact is more significant for potential exports, indicating substantial unrealised trade opportunities. These findings remain robust after controlling for time-specific external shocks and interpolating missing LPI data for intervening years. Addiionaly, by quantifying export efficiencies and emphasising the role of logistics, the study underscores the strategic importance of sustained investment in logistics infrastructure and the continued development of the logistics services sector to enhance Vietnam’s export performance.