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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. Laeven, Luc & Woodruff, Christopher, 2004. "The quality of the legal system, firm ownership, andfirm size," Policy Research Working Paper Series, The World Bank 3246, The World Bank.
  2. Simon Johnson & John McMillan & Christopher Woodruff, 2002. "Property Rights and Finance," American Economic Review, American Economic Association, American Economic Association, vol. 92(5), pages 1335-1356, December.
  3. 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, Cambridge University Press, vol. 51(04), pages 999-1001, December.
  4. 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, Elsevier, vol. 37(1), pages 416-443, February.
  5. P. Dorian Owen, 2003. "General-to-Specific Modelling Using PcGets," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 17(4), pages 609-628, 09.
  6. Daniel Berkowitz & David DeJong, 2001. "Policy Reform and Growth in Post-Soviet Russia," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 405, William Davidson Institute at the University of Michigan.
  7. Rodrik, Dani & Subramanian, Arvind & Trebbi, Francesco, 2002. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3643, C.E.P.R. Discussion Papers.
  8. 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.
  9. 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, The World Bank, number 15084, February.
  10. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1988. "Industrialization and the Big Push," NBER Working Papers, National Bureau of Economic Research, Inc 2708, National Bureau of Economic Research, Inc.
  11. 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.
  12. R. Quentin Grafton & Tom Kompas & P. Dorian Owen, 2004. "Bridging the Barriers: Knowledge Connections, Productivity, and Capital Accumulation," International and Development Economics Working Papers, International and Development Economics idec04-5, International and Development Economics.
  13. Simon Johnson & John McMillan, 2002. "Courts and Relational Contracts," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 18(1), pages 221-277, April.
  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. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, American Economic Association, vol. 91(5), pages 1369-1401, December.
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Citations

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Cited by:
  1. Dang, Duc Anh, 2013. "How foreign direct investment promote institutional quality: Evidence from Vietnam," Journal of Comparative Economics, Elsevier, Elsevier, vol. 41(4), pages 1054-1072.
  2. 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, Elsevier, vol. 39(3), pages 436-444, June.
  3. Bai, Jie & Jayachandran, Seema & Malesky, Edmund J. & Olken, Benjamin, 2013. "Does Economic Growth Reduce Corruption? Theory and Evidence from Vietnam," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9677, C.E.P.R. Discussion Papers.
  4. 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, Elsevier, vol. 48(1), pages 68-76.
  5. repec:hal:journl:halshs-00429732 is not listed on IDEAS
  6. Nam Tran-Quy & Almas Heshmati, 2009. "Measurements and Determinants of Pay Inequality and its Impacts on Firms Performance in Vietnam," TEMEP Discussion Papers, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP) 200930, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Nov 2009.

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