Spatial Effect Of Institutional Quality: An Empirical Study Using Provincial Competitiveness Index Of 63 Vietnamese Provinces From 2016 To 2022

Abstract

Purpose - This study examines the factors influencing institutional quality at the provincial level in Vietnam across the period from 2013 to 2021, encompassing all sixty-three provinces. The investigation also explores potential regional spillover effects, investigating whether there is substantial evidence supporting the idea that enhancing institutional quality in one province can yield benefits for neighbouring provinces. Design/Methodology/Approach - The purpose of this article is to examine the factors that influence institutional quality at the province level and any potential regional spillover effects. Three spatial weight matrices, namely a spatial contiguity matrix, a spatial inverse-distance matrix, and a spatial inverse-distance contiguity matrix, are employed with three different spatial econometric models: the spatial autoregressive model, the spatial Durbin model, and the spatial error model. The years 2016 through 2022 are included in the data collection for Vietnam's sixty-three provinces. Findings - The outcomes of this paper reveal that institutional quality among provinces is primarily represented by the provincial competitiveness index influenced by other spatial factors relating to economic development. Specifically, the spatial cost of living index seems to have negative impacts while the volume of locally transported goods presents a positive impact on the institutional quality of the host province and that of neighbouring provinces. Nevertheless, foreign direct investment, human development index, population density and industrial production index pose no influence on institutional quality. Originality/Value - This paper explores how the determinants of institutional quality within Vietnamese provinces might influence nearby regions. This provides a broader and more holistic understanding of the spatial effect of institutional quality and ultimately demonstrates how improvements in one province can contribute to positive changes in its neighbours.