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Formal and Informal Institutions in a Transition Economy: The Case of Vietnam

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  • Steer, Liesbet
  • Sen, Kunal

Abstract

Summary We examine the role of informal and formal institutions behind the growth of private sector in Vietnam since the official recognition of private enterprises in the early 1990s. We show that firms have increasingly taken on risks in their transactions in spite of weak formal institutions. Risk-taking by firms can be explained by the use of informal institutions such as relational contracts and networks along with recourse to emerging formal institutions such as written contracts. Our results suggest that informal institutions remain important as mechanisms of risk management even as the economy matures and new formal institutions gradually develop.

Suggested Citation

  • Steer, Liesbet & Sen, Kunal, 2010. "Formal and Informal Institutions in a Transition Economy: The Case of Vietnam," World Development, Elsevier, vol. 38(11), pages 1603-1615, November.
  • Handle: RePEc:eee:wdevel:v:38:y:2010:i:11:p:1603-1615
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    References listed on IDEAS

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    13. Henrik Hansen & John Rand & Finn Tarp, 2009. "Enterprise Growth and Survival in Vietnam: Does Government Support Matter?," Journal of Development Studies, Taylor & Francis Journals, vol. 45(7), pages 1048-1069, August.
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    Cited by:

    1. Méon, Pierre-Guillaume & Sekkat, Khalid, 2015. "The formal and informal institutional framework of capital accumulation," Journal of Comparative Economics, Elsevier, vol. 43(3), pages 754-771.
    2. Ritchie, Holly A., 2016. "Unwrapping Institutional Change in Fragile Settings: Women Entrepreneurs Driving Institutional Pathways in Afghanistan," World Development, Elsevier, vol. 83(C), pages 39-53.
    3. Berulava, George, 2013. "Do Trust-Based Relations Improve Firm’s Performance? Evidence from Transition Economies," MPRA Paper 48430, University Library of Munich, Germany.
    4. repec:ksa:szemle:1740 is not listed on IDEAS
    5. Svatopluk Kapounek, 2017. "The Impact of Institutional Quality on Bank Lending Activity: Evidence from Bayesian Model Averaging," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 67(5), pages 372-395, October.
    6. Pierre-Guillaume Méon & Khalid Sekkat, 2013. "The Formal and Informal Framework of Foreign Direct Investment," Working Papers 810, Economic Research Forum, revised Dec 2013.

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