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How foreign direct investment promote institutional quality: Evidence from Vietnam

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  • Dang, Duc Anh

Abstract

Using a unique dataset from a provincial competitiveness survey and the rising foreign direct investment (FDI) from joining the World Trade Organization (WTO), I find that variations in economic institutions across the provinces of Vietnam are associated with the flow of foreign investment. To overcome endogeneity problems, I use the minimum distance from each province to a main economic centre as an instrument for foreign investment inflows. The instrumental variable approach shows that the direction of influence is from greater foreign investment to better institutions. These results hold after controlling for various additional covariates, and are also robust to various alternative measures of institutions. I also find that foreign direct investment has greater short-term impacts on institutional quality in the northern provinces.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Comparative Economics.

Volume (Year): 41 (2013)
Issue (Month): 4 ()
Pages: 1054-1072

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Handle: RePEc:eee:jcecon:v:41:y:2013:i:4:p:1054-1072

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Web page: http://www.elsevier.com/locate/inca/622864

Related research

Keywords: Foreign investment; Institutions; Vietnam;

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References

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Cited by:
  1. Olga Kuzmina & Natalya Volchkova & Tatiana Zueva, 2014. "Foreign Direct Investment and Governance Quality in Russia," Working Papers w0205, Center for Economic and Financial Research (CEFIR).

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