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Spatial dependence in the growth process and implications for convergence rate: Evidence on Vietnamese provinces

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  • Esiyok, Bulent
  • Ugur, Mehmet

Abstract

Existing studies on Vietnamese provinces (e.g., Anwar and Nguyen, 2010) tend to assume that province-specific growth is independent of that in its neighbours. However, many studies analysing regional economic growth in China, Brazil and Mexico report the existence of spatial spill-over effects. This paper investigates whether this is the case for 60 Vietnamese provinces for the time-period 1999-2010, using a system-GMM estimator and a Solow growth model augmented with human and physical capital and spatial lag covariates. We report that spatial dependence is a significant determinant of growth and conditional convergence in Vietnamese provinces. We also demonstrate that the rate of convergence decreases as the distance between neighbouring provinces increases. Given these findings, we recommend testing for spatial dependence in growth models for Vietnam and beyond to avoid omitted variable bias and inform evidence-based regional policies that take account of spatial externalities.

Suggested Citation

  • Esiyok, Bulent & Ugur, Mehmet, 2017. "Spatial dependence in the growth process and implications for convergence rate: Evidence on Vietnamese provinces," Greenwich Papers in Political Economy 17507, University of Greenwich, Greenwich Political Economy Research Centre.
  • Handle: RePEc:gpe:wpaper:17507
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    More about this item

    Keywords

    Economic growth; Spatial dependence; Regional convergence; GMM;

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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