The impact of fdi and regional factors on economic growth in Vietnamese provinces: A spatial econometric analysis

Abstract

ABSTRACT By using spatial econometric models, this paper studies the impact of foreign direct investment (FDI) inflows and regional spatial factors on economic growth of 63 provinces in Vietnam over the period 2007–2018. Results show that, after controlling for the important factors of the growth model (human capital, physical capital, and institutional quality), FDI inflows have a rather limited direct and indirect impact in boosting economic growth of localities in Vietnam. Results from the estimation of spatial variables show three especially interesting key points: i) there is a close relationship in economic growth and economic shocks among neighbouring provinces; ii) capitals from state sector and domestic non-state sector of neighbouring provinces have a positive impact on economic growth in the host province; and iii) surprisingly, there is a trend of competition among neighbouring localities in attracting not only high-quality human resources but also in terms of untrained human resources.