Optimizing public expenditure for knowledge-based growth: Evidence from provincial data in Vietnam

Abstract

Purpose

This study examines the impact of public expenditure on science, technology, and education on provincial economic growth in Vietnam from 2002 to 2015. It explores how fiscal spending composition influences growth, with a focus on regional disparities and shifts across different economic reform periods.

Design/methodology/approach

The research employs the system GMM estimator to control endogeneity and unobserved heterogeneity, analyzing panel data from all 63 provinces in Vietnam. It analyses renovation periods (2002–2007 and 2008–2015) and compares the effectiveness of fiscal spending between Northern and Southern provinces.

Findings

The results show that public expenditure on science, technology, and education significantly drives provincial economic growth, particularly during the later reform period (2008–2015). Regional analysis reveals divergent impacts: Northern provinces benefit more from education spending, while science and technology investments yield stronger growth effects in Southern provinces. Development investment consistently supports growth, whereas recurrent expenditure shows limited productivity.

Research limitations/implications

This study is constrained to a 13-year period and a single-country context. Future research could extend the analysis to other developing economies or longer timelines to capture broader analysis.

Practical implications

The findings offer actionable insights for policymakers in Vietnam and other developing countries. Recommendations include reallocating fiscal resources toward knowledge-based investments, prioritizing education spending in Northern regions, and boosting science and technology funding in the South. Enhancing the share of development-oriented expenditure over recurrent spending is critical for achieving sustainable economic growth.

Originality/value

This paper provides a pioneering empirical analysis of optimizing public expenditure for knowledge-based growth at the provincial level in Vietnam, bridging gaps in the literature on fiscal policy and regional economic disparities in developing economies.