Business Development and Provincial Income in Vietnam: The Role of Labor Market Conditions

Nga Le and Almas Heshmati ()
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Almas Heshmati: University of Economics Ho Chi Minh City

No 18954, IZA Discussion Papers from IZA Network @ LISER

Abstract: Labor market conditions (LMC) play an important role in business development (BD) and provincial income, yet their interaction at the provincial level in Vietnam remains underexplored. This study examines how LMC are associated with BD and Gross Regional Domestic Product (GRDP) per capita across 63 provinces during 2018–2023, using data from the Vietnam General Statistics Office (GSO) and the Provincial Competitiveness Index (PCI). A simultaneous equation framework estimated by three-stage least squares (3SLS) is applied to capture the interdependence between enterprise density and GRDP per capita. The findings reveal a nonlinear and bidirectional relationship, with diminishing marginal effects at higher development levels. LMC and selected PCI dimensions are associated with enterprise activity and income differences, while regional disparities persist. The results highlight the importance of balanced regional development, improved labor allocation, and stronger institutional quality to support sustainable BD and reduce provincial gaps.

Keywords: business development; labor market conditions; Provincial Competitiveness Index; GRDP per capita; Vietnamese provinces (search for similar items in EconPapers)
JEL-codes: C33 J21 J24 L26 R11 (search for similar items in EconPapers)
Date: 2026-09
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