The Impact of Recentralisation on FDI: Evidence from a Quasi-Natural Experiment

Hiep Ngoc Luu, Minh Ngoc Nguyen and Hieu Thanh Nguyen

Post-Communist Economies, 2022, vol. 34, issue 4, 543-563

Abstract: Although decentralised governance has been one of the most salient political regimes worldwide over the past few decades, many countries have started to realise various shortcomings associated with their decentralisation process. As a consequence, a number of central governments have attempted to pursue recentralisation reforms in order to reclaim authority from the localities. This government reform can lead to significant changes in institutional arrangements, and subsequently, may influence various aspects of socio-economic activities. However, the real impact of recentralisation reform still remains ambiguous. In this paper, we examine how recentralisation may affect foreign direct investment (FDI) inflows. We exploit the pilot recentralisation reform that temporarily abolished the intermediate legislative branches in some provinces in Vietnam as a quasi-natural experiment. The result shows that recentralisation leads to a significant reduction in FDI inflows. Our results are robust to a number of sensitivity analyses and falsification tests. Overall, our findings contribute to the literature on the determinants of FDI and provide new evidence on the real effect of recentralisation reform.

Date: 2022
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/14631377.2022.2029252 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:pocoec:v:34:y:2022:i:4:p:543-563

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CPCE20

DOI: 10.1080/14631377.2022.2029252

Access Statistics for this article

Post-Communist Economies is currently edited by Roger Clarke

More articles in Post-Communist Economies from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().