The Role of Institutions in Economic Development: The Case of Vietnam During 2012–2015

The panel regression tests the causal relationship between institutional factors and economic development of 63 Vietnamese provinces during the period 2012–2015, and to prove a new argument for New Institutional Economics that different developmental levels can intervene in this causal relationship. The secondary data are collected at the provincial level and the panel regression is used to test this causal relationship in the institutional models.As a consequence, institutions creating conditions for human development, social capital development, and business development contribute to economic development. Meanwhile, the “payoff” mindset appears to be gaining economic priority in Vietnamese governance, as evidenced by, for example, low degree of participation, informal charges in public transactions, and low access to land and security.When testing causal relationships between institutional factors and economic development in each developmental cluster, there are some new determinants (i.e., control of corruption, transparent business environment, and equitable business information) and some complex impacts with both negative and positive signs in different contexts (public administrative procedures, minimal informal charges).The study contributes significant evidence from Vietnam to support New Institutional Economics and New Public Management (e.g., enabling government-oriented managerialism and good governance).