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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    81 Downloads   181 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.

Conflicts of Interest

The authors declare no conflicts of interest regarding the publication of this paper.

Cite this paper

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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