Climate Shocks, Local Governance Quality, and Household Economic Resilience: Micro-Level Evidence from Vietnam

This paper examines whether and how local governance quality shapes household economic resilience to climate shocks in Vietnam - one of the world’s most climate-vulnerable emerging economies. Combining nationally representative microdata from three rounds of the Vietnam Household Living Standards Survey (2018, 2020, 2022) with province-year indicators of disaster severity and governance performance (PAPI), we estimate a pooled ordinary least squares (OLS) and interaction model with two-way fixed effects at the province and year levels to identify the moderating role of governance in the climate shock–income relationship. The results show that climate shocks significantly reduce household per-capita income, but higher-quality provincial governance substantially attenuates these losses. Marginal effects indicate that in high-governance provinces, the income-dampening effect of shocks becomes negligible. Moreover, governance benefits are markedly larger for vulnerable groups, including poor, rural, and agricultural households, suggesting that institutional quality can be inherently pro-poor in climate-stressed contexts. These findings advance the resilience and governance literature by providing micro-level causal evidence from a developing country and highlight governance strengthening as a core policy lever for climate adaptation, equitable development, and inclusive growth.