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Business Development and Provincial Income in Vietnam: The Role of Labor Market Conditions

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  • Le Thi, Nga

    (School of Economics, University of Economics Ho Chi Minh City, Vietnam)

  • Heshmati, Almas

    (University of Economics Ho Chi Minh City)

Abstract

Labor market conditions (LMC) play an important role in business development (BD) and provincial income, yet their interaction at the provincial level in Vietnam remains underexplored. This study examines how LMC are associated with BD and Gross Regional Domestic Product (GRDP) per capita across 63 provinces during 2018–2023, using data from the Vietnam General Statistics Office (GSO) and the Provincial Competitiveness Index (PCI). A simultaneous equation framework estimated by three-stage least squares (3SLS) is applied to capture the interdependence between enterprise density and GRDP per capita. The findings reveal a nonlinear and bidirectional relationship, with diminishing marginal effects at higher development levels. LMC and selected PCI dimensions are associated with enterprise activity and income differences, while regional disparities persist. The results highlight the importance of balanced regional development, improved labor allocation, and stronger institutional quality to support sustainable BD and reduce provincial gaps.

Suggested Citation

  • Le Thi, Nga & Heshmati, Almas, 2026. "Business Development and Provincial Income in Vietnam: The Role of Labor Market Conditions," IZA Discussion Papers 18954, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp18954
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    References listed on IDEAS

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    1. Rodriguez-Clare, Andres, 1996. "Multinationals, Linkages, and Economic Development," American Economic Review, American Economic Association, vol. 86(4), pages 852-873, September.
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    Keywords

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    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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