The impact of governance and transparency on firm investment in Vietnam

Edmund Malesky, Neil McCulloch () and Nhat Nguyen

The Economics of Transition, 2015, vol. 23, issue 4, 677-715

Abstract: type="main" xml:id="ecot12068-abs-0001">

A large literature asserts a causal relationship between the quality of economic governance and economic performance. However, attempts to establish such a link at an aggregate level have met with considerable methodological criticism. This paper seeks to overcome this limitation. We match a panel of Vietnamese enterprises from 2006 to 2010 with a unique panel dataset measuring sub-national economic governance to estimate a relationship between local governance and private investment. We do not find a significant relationship between investment and most traditional forms of governance. However, there is one important exception – transparency, especially the public posting of planning documents, is strongly associated with higher investment across a range of different specifications. Our results have significant implications for policy, given the prevailing theory that changes in the quality of local economic governance will spur improved economic performance.

Date: 2015
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