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Local Governance: Impacts of Fiscal Decentralization on Government Size and Spending Composition in Vietnam

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  • Su D. Thanh
  • Nguyen P. Canh

Abstract

The study provides an understanding of the impacts of fiscal decentralization and local governance on government size and spending composition. We use a balanced panel data set of 63 provinces of Vietnam over the 2006–2015 period. By estimating the spatial Durbin model, we find that local public spending and government size grow over time and have spatial spillovers. Fiscal decentralization significantly reduces public spending and government size, which supports the Leviathan hypothesis. More interestingly, combining local governance, the marginal spatial spillover effects of the fiscal decentralization on public spending and government size are intensified. Our findings imply that local governments should enhance interregional collaboration in fiscal management to limit duplicate public spending and promote regional sustainable development.

Suggested Citation

  • Su D. Thanh & Nguyen P. Canh, 2019. "Local Governance: Impacts of Fiscal Decentralization on Government Size and Spending Composition in Vietnam," Asian Economic Journal, East Asian Economic Association, vol. 33(4), pages 311-340, December.
    • Handle: RePEc:bla:asiaec:v:33:y:2019:i:4:p:311-340
    DOI: 10.1111/asej.12189
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    Cited by:

    1. Kassouri, Yacouba, 2022. "Fiscal decentralization and public budgets for energy RD&D: A race to the bottom?," Energy Policy, Elsevier, vol. 161(C).
    2. Mingxiong Bi & Chencheng Wang & Dian Fu & Xun Tan & Shurong Yu & Junbai Pan & Kun Lv, 2022. "Chinese-Style Fiscal Decentralization, Ecological Attention of Government, and Regional Energy Intensity," Energies, MDPI, vol. 15(22), pages 1-28, November.
    3. Bach Nguyen & Nguyen Phuc Canh & Su Dinh Thanh, 2021. "Institutions, Human Capital and Entrepreneurship Density," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(3), pages 1270-1293, September.
    4. Su, Thanh Dinh & Nguyen, Canh Phuc, 2021. "Twin balances, public governance and private investment: Quantile estimation for OECD countries," International Economics, Elsevier, vol. 165(C), pages 85-93.
    5. Abdullah & Wang Qingshi & Muhammad Akbar, 2022. "A Spatial Panel Analysis of Food Security and Political Risk in Asian Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 161(1), pages 345-378, May.
    6. Jinsol Park, 2022. "Fiscal Decentralization and the Composition of Local Government Expenditure: Evidence from South Korea," Public Finance Review, , vol. 50(1), pages 62-90, January.
    7. Mohammed Nayel Abu Alfoul & Ibrahim Naser Khatatbeh & Fouad Jamaani, 2022. "What Determines the Shadow Economy? An Extreme Bounds Analysis," Sustainability, MDPI, vol. 14(10), pages 1-22, May.

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