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Fiscal Decentralisation and Externalities on Economic Growth: Spatial-provincial evidence from Vietnam

Author

Listed:
  • Bui, Duy Tung

    (University of Economics Ho Chi Minh City, Vietnam)

  • Nguyen , Canh Phuc

    (University of Economics Ho Chi Minh City, Vietnam)

  • Dinh , Thanh Su

    (University of Economics Ho Chi Minh City, Vietnam)

Abstract

This paper aims to investigate the impacts of fiscal decentralisation on the provincial economic development in 62 Vietnamese provinces from 2011-2018. We estimate a Spatial Durbin Model (SDM) based on a growth model with spatial externalities. The focus of the paper is on the spatial spillover effects of fiscal decentralisation on the provincial income levels. The results confirm the existence of spatial interdependency among Vietnamese provinces. The findings indicate that fiscal decentralisation and physical capital not only affects the income level within one province, but also contribute positively to the outputs of nearby provinces. The study does not find significant effects of human capital on provincial income. We also show that these effects vary across five main economic regions of Vietnam. There is also evidence that the total effects are stronger in high institutional quality levels, which points out to the “sand the wheels” effect. Policy implications are also discussed.

Suggested Citation

  • Bui, Duy Tung & Nguyen , Canh Phuc & Dinh , Thanh Su, 2021. "Fiscal Decentralisation and Externalities on Economic Growth: Spatial-provincial evidence from Vietnam," Journal of Economic Development, The Economic Research Institute, Chung-Ang University, vol. 46(4), pages 31-64, December.
    • Handle: RePEc:ris:jecdev:0035
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    More about this item

    Keywords

    Fiscal Policy; Fiscal Decentralisation; Economic Growth; Spillover Effects; Vietnam;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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