Institutional quality and economic growth Vietnam provincial level: A spatial regression approach

Abstract

This study explores the local governance mechanism at the provincial level of Vietnam through the construction of the PGI index and places this index in relation to local economic development policies. Through the combination of statistical and regression methods, the author has discovered the following relationships: Firstly, it is possible to establish a causal relationship between the quality of governance institutions and effective income per worker. Secondly, using Arellano and Bond's (1991) GMM estimation method for dynamic array data with endogenous variables, this study demonstrates that the quality of governance institutions contributes positively to the economic growth of companies, provinces, and cities over time, while also helping to partially explain the income disparity between localities. Thirdly, the influence of governance institutions' quality on effective per capita income differs according on institutional feature; for example, corruption control and policy quality have a positive linear relationship. while democracy and public policy have a U-shaped association with income level, the bottom point of the U is much lower than the average local score. Fourthly, the test results indicate that the growth effect of institutional quality differs by economic location,