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Institutions Matter : The Case of Vietnam

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  • Thi Bich Tran

    (Crawford School of Economics and Government)

  • R. Quentin Grafton
  • Tom Kompas

Abstract

The paper investigates institutional reforms in Vietnam and their impact on the economic performance of firms. Using the provincial competitiveness index 2006 (PCI06) and firm-level data in Vietnam in 2005, the results show that provincial competitiveness is economically and statistically significant in explaining cross-province differences in firm performance. We find that a one percentage point improvement in government practice could increase the daily value-added of an average firm by an amount equivalent to nearly three times per capita GDP per day. The results show that an improvement in providing market information, more secure land tenure and labor training assistance has a positive effect on firm performance. By contrast, weaknesses in the judiciary system and administrative reforms impede growth of non-state firms. The findings indicate that governance is an important obstacle to the development of the non-state sector in Vietnam.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Development Economics Working Papers with number 21938.

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Date of creation: Jan 2008
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Handle: RePEc:eab:develo:21938

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Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
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Keywords: Institution; Transition; property rights; non-state firm;

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References

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  1. Berkowitz, Daniel & DeJong, David N., 2003. "Policy reform and growth in post-Soviet Russia," European Economic Review, Elsevier, vol. 47(2), pages 337-352, April.
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  4. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, 06.
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  8. Field, Alexander J., 1991. "Institutions, Institutional Change and Economic Performance. By Douglass C. North. Cambridge: Cambridge University Press, 1990. Pp. viii, 152. $32.50, cloth; $10.95, paper," The Journal of Economic History, Cambridge University Press, vol. 51(04), pages 999-1001, December.
  9. R. Grafton & Tom Kompas & P. Owen, 2007. "Bridging the barriers: knowledge connections, productivity and capital accumulation," Journal of Productivity Analysis, Springer, Springer, vol. 28(3), pages 219-231, December.
  10. Stoyan Tenev & Amanda Carlier & Omar Chaudry & Quynh-Trang Nguyen, 2003. "Informality and the Playing Field in Vietnam's Business Sector," World Bank Publications, The World Bank, number 15084, October.
  11. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(1), pages 83-116, February.
  12. Gagliardi, Francesca, 2008. "Institutions and economic change: A critical survey of the new institutional approaches and empirical evidence," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(1), pages 416-443, February.
  13. P. Dorian Owen, 2003. "General-to-Specific Modelling Using PcGets," Journal of Economic Surveys, Wiley Blackwell, vol. 17(4), pages 609-628, 09.
  14. McMillan, John & Woodruff, Christopher, 1999. "Dispute Prevention without Courts in Vietnam," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 15(3), pages 637-58, October.
  15. Besley, Timothy, 1995. "Property Rights and Investment Incentives: Theory and Evidence from Ghana," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 103(5), pages 903-37, October.
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Cited by:
  1. Bai, Jie & Jayachandran, Seema & Malesky, Edmund J. & Olken, Benjamin, 2013. "Does Economic Growth Reduce Corruption? Theory and Evidence from Vietnam," CEPR Discussion Papers 9677, C.E.P.R. Discussion Papers.
  2. Nguyen, Thang V. & Le, Ngoc T.B. & Bryant, Scott E., 2013. "Sub-national institutions, firm strategies, and firm performance: A multilevel study of private manufacturing firms in Vietnam," Journal of World Business, Elsevier, vol. 48(1), pages 68-76.
  3. Jie Bai & Seema Jayachandran, 2013. "Does Economic Growth Reduce Corruption? Theory and Evidence from Vietnam," Working Papers id:5507, eSocialSciences.
  4. Nam Tran-Quy & Almas Heshmati, 2009. "Measurements and Determinants of Pay Inequality and its Impacts on Firms Performance in Vietnam," TEMEP Discussion Papers 200930, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Nov 2009.
  5. repec:hal:journl:halshs-00429732 is not listed on IDEAS
  6. Dang, Duc Anh, 2013. "How foreign direct investment promote institutional quality: Evidence from Vietnam," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1054-1072.
  7. Harbi, Sana El & Anderson, Alistair R., 2010. "Institutions and the shaping of different forms of entrepreneurship," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 39(3), pages 436-444, June.

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