TITLE:
The Effect of FDI on the Relationship between Fiscal Decentralisation and Economic Growth in Vietnam: Empirical Evidence from Provincial Data
AUTHORS:
Nguyen Van Bon
KEYWORDS:
Fiscal Decentralization, Economic Growth, FDI, Two-Step GMM Estimators, Vietnam
JOURNAL NAME:
Theoretical Economics Letters,
Vol.9 No.6,
August
29,
2019
ABSTRACT: Fiscal decentralization not only promotes economic
growth but brings more power to local governments in attracting FDI inflows as
well. However, economists and policy-makers often strongly debate the influence
of FDI on the fiscal decentralization-growth relationship. This paper
empirically investigates the role of FDI in the relationship between fiscal
decentralization and economic growth for a panel dataset of 52 provinces in
Vietnam during the period 2007-2016
using the two-step GMM Arellano-Bond and FE-2SLS estimators. The estimated
results confirm that fiscal decentralization and FDI significantly enhance
economic growth, but their interaction terms impede growth rate. In addition,
public investment is a significant determinant. These findings suggest some
important policy recommendations for central governments in developing
countries, especially Vietnam.