Abstract
This paper focuses on investigating the impacts of political connections on household income and agricultural investments in mountainous areas of Vietnam by employing several matching methodologies. Propensity score matching is an increasingly well-known approach for evaluation studies in agricultural economics. Additionally, this study attempted to verify the significance of political connections in rural economics. To conduct the empirical approach, we used survey data of 550 households from three provinces in Northern Vietnam. The findings indicate that political connections have significantly positive impacts on the total income of households and farming behavior, but significantly negative impacts on agricultural investments of the households. Differences between the income of household connected and not were connected group of households is estimated at approximately 30 million VND (US$ 1304) per year. However, the total income of the connected households was not heavily based on agricultural production, non-agricultural activities accounted for a larger share of the total income. Another important outcome confirmed the privileges of politically connected households in terms of receiving extension courses substantially increased the inequality between rural households in the survey areas because the distribution of government subsidies was distorted to target the necessities.
Similar content being viewed by others
Notes
Data and the survey questionnaire are available from the authors upon request.
The exchange rate at the time of data collection (2018) was 1 USD = 23,270 VND.
References
Adhikari A, Derashid C, Zhang H (2006) Public policy, political connections, and effective tax rates: longitudinal evidence from Malaysia. J Account Public Policy 25(5):574–595
Ahmed A, Rich MW, Sanders PW, Perry GJ, Bakris GL, Zile MR, Love TE, Aban IB, Shlipak MG (2007) Chronic kidney disease associated mortality in diastolic versus systolic heart failure: a propensity matched study. Am J Cardiol 99(3):393–398
Amore MD, Bennedsen M (2013) The value of local political connections in a low-corruption environment. J Financial Econ 110(2):387–402
Austin PC (2011) An introduction to propensity score methods for reducing the effects of confounding in observational studies. Multivar Behav Res 46(3):399–424
Austin PC, Grootendorst P, Anderson GM (2007) A comparison of the ability of different propensity score models to balance measured variables between treated and untreated subjects: a monte carlo study. Stat Med 26(4):734–753
Baltar VT, Sousa CAD, Westphal MF (2014) Mahalanobis’ distance and propensity score to construct a controlled matched group in a Brazilian study of health promotion and social determinants. Revista Brasileira de Epidemiologia 17:668–679
Boubakri N, Cosset J-C, Saffar W (2008) Political connections of newly privatized firms. J Corp Finance 14(5):654–673
Boubakri N, Guedhami O, Mishra D, Saffar W (2012) Political connections and the cost of equity capital. J Corp Finance 18(3):541–559
Caliendo M, Kopeinig S (2008) Some practical guidance for the implementation of propensity score matching. J Econ Surv 22(1):31–72
Charumilind CKR, Wiwattanakantang Y (2006) Connected lending: Thailand before the financial crisis. J Bus 79(1):181–218
Cingano F, Pinotti P (2013) Politicians at work: the private returns and social costs of political connections. J Eur Econ Assoc 11(2):433–465
Dalton RJ, Hac PM, Nghi PT, Ong NNT (2002) Social relations and social capital in Vietnam: findings from the 2002 world values survey. Comp Sociol 1(3):369–386
De Brauw A, Harigaya T (2007) Seasonal migration and improving living standards in Vietnam. Am J Agric Econ 89(2):430–447
De Janvry A, Sadoulet E (2008) The global food crisis: identification of the vulnerable and policy responses. Agric Res Econ Update 12(2):18–21
Diamond A, Sekhon JS (2013) Genetic matching for estimating causal effects: a general multivariate matching method for achieving balance in observational studies. Rev Econ Stat 95(3):932–945
Do Q-T, Iyer L (2008) Land titling and rural transition in Vietnam. Econ Dev Cult Change 56(3):531–579
Faccio M (2006) Politically connected firms. Am Econ Rev 96(1):369–386
Faccio M, Masulis RW, McConnell J (2006) Political connections and corporate bailouts. J Finance 61(6):2597–2635
Firth M, Rui OM, Wu W (2011) The effects of political connections and state ownership on corporate litigation in China. J Law Econ 54(3):573–607
Fisman R (2001) Estimating the value of political connections. Am Econ Rev 91(4):1095–1102
Fritzen S (2002) Growth, inequality and the future of poverty reduction in Vietnam. J Asian Econ 13(5):635–657
Glazerman S, Levy DM, Myers D (2003) Nonexperimental versus experimental estimates of earnings impacts. Ann Am Acad Political Soc Sci 589(1):63–93
Goldstein M, Udry C (2008) The profits of power: land rights and agricultural investment in Ghana. J Political Econ 116(6):981–1022
Ha TM (2014) Evaluating production efficiency and quality of leafy radish cultivated according to the Vietnamese good agricultural practice (vietgap) guideline in northern Vietnam. Int J Dev Res 4(11):2219–2224
Heley J, Jones L (2012) Relational rurals: some thoughts on relating things and theory in rural studies. J Rural Stud 28(3):208–217
Hertz T (2009) The effect of nonfarm income on investment in Bulgarian family farming. Agric Econ 40(2):161–176
Hornbeck R (2010) Barbed wire: property rights and agricultural development. Q J Econ 125(2):767–810
Jacoby HG, Mansuri G (2008) Land tenancy and non-contractible investment in rural Pakistan. Rev Econ Stud 75(3):763–788
Jena PR, Chichaibelu BB, Stellmacher T, Grote U (2012) The impact of coffee certification on small-scale producers livelihoods: a case study from the Jimma zone, Ethiopia. Agric Econ 43(4):429–440
Kassie M, Jaleta M, Shiferaw B, Mmbando F, Mekuria M (2013) Adoption of interrelated sustainable agricultural practices in smallholder systems: evidence from rural Tanzania. Technol Forecast Soc Change 80(3):525–540
Khanh TD, Xuan TD, Chin DV, Chung IM, Abdelghany EA, Tawata S (2006) Current status of biological control of paddy weeds in Vietnam. Weed Biol Manag 6(1):1–9
Leuz C, Oberholzer-Gee F (2006) Political relationships, global financing, and corporate transparency: evidence from Indonesia. J Financial Econ 81(2):411–439
Li H, Meng L, Wang Q, Zhou LA (2008) Political connections, financing and firm performance: evidence from Chinese private firms. J Dev Econ 87(2):283–299
Ling L, Zhou X, Liang Q, Song P, Zeng H (2016) Political connections, overinvestments and firm performance: evidence from Chinese listed real estate firms. Finance Res Lett 18:328–333
Markussen T, Tarp F (2014) Political connections and land-related investment in rural Vietnam. J Dev Econ 110:291–302
Markussen T, Tarp F, Van Den Broeck K (2011) The forgotten property rights: evidence on land use rights in Vietnam. World Dev 39(5):839–850
McLachlan GJ (1999) Mahalanobis distance. Resonance 4(6):20–26
Mendola M (2007) Agricultural technology adoption and poverty reduction: a propensity-score matching analysis for rural Bangladesh. Food Policy 32(3):372–393
Nguyen LD, Raabe K, Grote U (2015) Rural-urban migration, household vulnerability, and welfare in Vietnam. World Dev 71:79–93
Niessen A, Ruenzi S (2010) Political connectedness and firm performance: evidence from Germany. Ger Econ Rev 11(4):441–464
Reardon T, Crawford E, Kelly V (1994) Links between nonfarm income and farm investment in African households: adding the capital market perspective. Am J Agric Econ 76(5):1172–1176
Rosenbaum PR (2002) Overt Bias in Observational Studies. Observational Studies, Springer, NY
Rosenbaum PR, Rubin DB (1985) Constructing a control group using multivariate matched sampling methods that incorporate the propensity score. Am Stat 39(1):33–38
Sekhon JS (2011) Multivariate and propensity score matching software with automated balance optimization: the matching package for r. J Stat Softw 42(7):1–52
To-The N, Nguyen-Anh T (2020) Impact of government intervention to maize efficiency at farmers level across time: a robust evidence in northern Vietnam. Environ Dev Sustain 23(2):2038–2061
To-The N, Tran-Nam Q (2015) Impact of political connection on farming households’ performance of tea production in Vietnam. J Agric Sci 7(12):107–119
Tu VH, Can ND, Takahashi Y, Kopp SW, Yabe M (2018) Modelling the factors affecting the adoption of eco-friendly rice production in the Vietnamese Mekong delta. Cogent Food Agric 4(1):1432538
Viaggi D, Raggi M, Paloma SGY (2010) An integer programming dynamic farm-household model to evaluate the impact of agricultural policy reforms on farm investment behaviour. Eur J Oper Res 207(2):1130–1139
Wong W-Y, Hooy C-W (2018) Do types of political connection affect firm performance differently? Pac Basin Finance J 51:297–317
Woodhouse A (2006) Social capital and economic development in regional Australia: a case study. J Rural Stud 22(1):83–94
Wu W, Wu C, Rui OM (2012) Ownership and the value of political connections: evidence from china. Eur Financial Manag 18(4):695–729
Xia H, Li C, Zhou D, Zhang Y, Xu J (2020) Peasant households’ land use decision-making analysis using social network analysis: a case of Tantou village, China. J Rural Stud 80:452–468
Funding
No external funding.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflict of interest
The authors declare no conflict of interest.
Ethical approval
This article does not contain any studies with human participants or animals performed by any of the authors.
Additional information
Publisher's Note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
About this article
Cite this article
Nguyen-Anh, T., To-The, N. & Nguyen-Van, S. Economic impacts of political ties in Vietnam: evidence from Northern rural households. Asia-Pac J Reg Sci 5, 993–1021 (2021). https://doi.org/10.1007/s41685-021-00200-z
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s41685-021-00200-z