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The Effect of FDI on the Relationship between Fiscal Decentralisation and Economic Growth in Vietnam: Empirical Evidence from Provincial Data

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DOI: 10.4236/tel.2019.96132    84 Downloads   187 Views
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ABSTRACT

Fiscal decentralization not only promotes economic growth but brings more power to local governments in attracting FDI inflows as well. However, economists and policy-makers often strongly debate the influence of FDI on the fiscal decentralization-growth relationship. This paper empirically investigates the role of FDI in the relationship between fiscal decentralization and economic growth for a panel dataset of 52 provinces in Vietnam during the period 2007-2016 using the two-step GMM Arellano-Bond and FE-2SLS estimators. The estimated results confirm that fiscal decentralization and FDI significantly enhance economic growth, but their interaction terms impede growth rate. In addition, public investment is a significant determinant. These findings suggest some important policy recommendations for central governments in developing countries, especially Vietnam.

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Van Bon, N. (2019) The Effect of FDI on the Relationship between Fiscal Decentralisation and Economic Growth in Vietnam: Empirical Evidence from Provincial Data. Theoretical Economics Letters, 9, 2093-2109. doi: 10.4236/tel.2019.96132.

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