Working Paper BETA #2016-17

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Title : Public expenditure, growth and productivity of Vietnam’s provinces.

Author(s) : Duc-Anh Le, Phu Nguyen-Van, Thi Kim Cuong Pham

Abstract : This paper proposes a structural approach to investigate total factor productivity and economic growth of Vietnam’s provinces during the 2000-2007 period. TFP is composed of three components: an autonomous technological change, an observed deterministic part depending on external factors, and an unobserved stochastic part. Estimation results do not show any evidence regarding the impacts of national and local public spending on TFP and economic growth of Vietnam’s provinces. Human capital and the local economy’s structure (shares of industry, services, and agriculture) can play a significant role in explaining the cross-province differences in terms of productivity. Finally, TFP of Vietnam’s provinces does not converge in the long run as it displays a polarization feature around two main groups of provinces, a large group with low TFP levels and much smaller group with high TFP levels. This bipolar pattern of TFP distribution helps to explain the competitiveness disparity among the Vietnam’s provinces.

Key-words : Structural modeling, national public expenditure; local public expenditure; total factor productivity; Vietnam’s provinces

JEL Classification : C23; H50, H70, O40