THE ROLE OF INSTITUTIONAL QUALITY IN THE RELATIONSHIP BETWEEN FDI AND ECONOMIC GROWTH IN VIETNAM: EMPIRICAL EVIDENCE FROM PROVINCIAL DATA

Nguyen van Bon ()
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Nguyen van Bon: School of Public Finance, University of Economics Ho Chi Minh, 180/20A Lac Long Quan St., Ward 10, District 11, Ho Chi Minh City, Vietnam

The Singapore Economic Review (SER), 2019, vol. 64, issue 03, 601-623

Abstract: All investigations into the role of institutions in the relationship between foreign direct investment (FDI) and economic growth conclude the impact of interaction between FDI and institutional quality on economic growth is significantly positive. Contrary to the conclusion of these studies, this paper finds it is significantly negative for a panel data of 43 provinces in Vietnam over the period 2005–2012 via the estimation method of difference panel GMM Arellano–Bond. In addition, the estimated results also show: (1) FDI inflows significantly foster economic growth; (2) Good institutional quality has a significantly positive impact while bad institutional quality has a negative albeit insignificant effect on economic growth. From the policy perspective, these findings signal an important message to developing countries that governments should carefully adjust policies and institutions because aside from attracting more FDI inflows and promoting the economic activities, it can also be detrimental to economic growth.

Keywords: FDI inflows; institutional quality; economic growth; panel difference GMM; provinces of Vietnam (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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DOI: 10.1142/S0217590816500223

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