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Fiscal Decentralisation and Economic Growth: Evidence from Vietnam

Abstract

Since the beginning of the renovation process or “Doi Moi” in 1986, Vietnam’s economy has experienced relatively high economic growth. Besides greater openness in trade and investment, governance reform has been one of the driving forces of the country’s fast and sustainable growth. Fiscal decentralisation has been one of the key reforms that saw central government granting more fiscal autonomy to provincial governments, who now have a greater discretion than before in collecting and distributing resources for developmental purposes in their jurisdictions. Using a newly available provincial panel dataset, this paper examines the effects of fiscal decentralization on economic growth in Vietnam for the period 2004–2010 by applying new proxy measures of fiscal decentralisation as the ratio of different types of revenue over total expenditure of provinces. The results suggest a significant positive effect of fiscal decentralisation on provincial economic growth in Vietnam. The empirical models adopted also address the concerns of endogeneity and unobserved heterogeneity between provinces.

Keywords

  • Fiscal decentralisation
  • Economic growth
  • Vietnam
  • Doi Moi
  • Provincial panel data

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Fig. 13.1
Fig. 13.2
Fig. 13.3

Notes

  1. 1.

    Vietnam currently has 63 provinces after Ha Tay province was merged into Hanoi in 2008.

  2. 2.

    Nguyen-Hoang and Schroeder (2010)

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Correspondence to Tai Dang Nguyen .

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Appendix

Appendix

See Fig. A.1

Fig. A.1
figure 4

Assignment of tax revenue sources by level of government. Source Vietnam’s 2002 State Budget Law

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Nguyen, T.D. (2017). Fiscal Decentralisation and Economic Growth: Evidence from Vietnam. In: Cooray, N., Abeyratne, S. (eds) Decentralization and Development of Sri Lanka Within a Unitary State. Springer, Singapore. https://doi.org/10.1007/978-981-10-4259-1_13

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  • DOI: https://doi.org/10.1007/978-981-10-4259-1_13

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