The American Economic Review, 76(2), 120-125. Decentralization of governance and development. Fiscal decentralization and macroeconomic stability: The experience of large developing and transition economies. De-Mello, L.R. Our results suggest that below‐average governance regions are unlikely to generate any beneficial effect of fiscal decentralization on economic growth. Levitt, SD. Some cross country empirical evidence. As Vietnam's economic growth in this period is not high, the data collected during this period are suitable to assess the effect of fiscal decentralization on provincial economic growth. The study contributes to this debate on the basis of such an emerging economy as Vietnam. This result is due to the fact that local governments drive the private sector into delivering public services, thereby reducing local government size. Fiscal federalism. Lockwood, B. Akai, N., and Hosio, M. (2009). Our findings imply that fiscal decentralization may stimulate Vietnam's local governments to increase tax revenue collection to finance local public goods provision. There are many econometric techniques to deal with endogenous problems. Fiscal decentralization indicators, FD(1) and FD(2), show significant and positive effects on economic growth, which supports the fiscal autonomy and competition theories of Oates (1972) and Tiebout (1956). The Unequal Geographic Burden of Federal Taxation. Economics & Politics, 13, 237–256. Because FE models focus on controlling for unobserved heterogeneity, they disregard endogenous problems, which consequently generates biased results. Interestingly, the coefficients on FD(1) and FD(2) for the Southeast and Mekong River Delta region are 0.031 per cent and 0.032 per cent, respectively, which are higher than those for the Red River Delta region (0.012% and 0.029%, respectively). Based on SGFD theories, we hypothesize that local public governance affects not only provincial productivity growth, but also improves the marginal growth effect of fiscal decentralization. Federal Fiscal Constitutions: Risk Sharing and Redistribution. [Color figure can be viewed at wileyonlinelibrary.com]. Oates, WE. IDB/OECD. In the case of police protection, total cost will increase for one of two reasons: (1) Given a district The dilemma of fiscal federalism: grants and fiscal performance around the world. Alternatively, when fiscal decentralization is too low, local governments lack incentives and innovations for the efficient provision of public goods. Review of Economics and Statistics, 83(3), 446-456. World Bank Working Paper 3913. 89, 1157-1199. Hoyt, W. H. (2001). https://doi.org/10.1016/j.jdeveco.2013.01.006. Moreover, the results in Tables 8 and 9 are estimated with a sample of 58 provinces, which exclude four outliers including Vinh Phuc, Binh Duong, Ho Chi Minh City and Ba Ria‐Vung Tau. Grossman, P.J. How should subnational government borrowing be regulated? Cai, H. and Treisman, D. (2005). Porto, A. and Sanguinetti, P. (2001). Source: GSO of Vietnam. Does centralization increase the size of government? Allocating the U.S. Federal Budget to the States: The Impact of the President. European Journal of Political Economy, 27(3), 485-506. Journal of Political Economy, 98(4), 803-826. Harcourt Brace Jovanovich Press. Reingewertz, Yaniv Moreover, the dataset features panel data with various cross‐sections. FinanzArchiv: Public Finance Analysis, 62(2), 250-280. Andrew Young School of Policy Studies. (1979). Based on the production function of a province, the paper investigates the relationships among fiscal decentralization, local governance, and economic growth of Vietnam's provinces. Second, using PCI as a proxy of public governance, the study shows that the growth effect of public governance varies across provinces, which may be due to differences in levels of public governance. Central government capital spending is compiled from Key Indicators for Asia and the Pacific 2017, ADB. It is noteworthy that the levels of fiscal decentralization produce various effects on local economic performance. Provincial government 100 per cent retained revenues plus shared revenues compose total provincial government decentralized revenue. Our research model adapts a production function framework that has widely been applied in the earlier empirical literature on local economic growth as in Lin and Liu (2000), Jin and Zou (2005) and Nguyen‐Van et al. European Economic Review, 40, (1), 61-89. Environment and Planning C: Government and Policy, 13(1): 1-23. The two self‐financing indicators mentioned above have the following advantageous points. Why Countries Are Fiscally Decentralizing? The p‐value of the Arellano–Bond test, AR(2), is also over 0.100, suggesting that these models reveal no serial autocorrelation. A cross-country analysis. Hence, central discretion through fiscal transfers should be removed to foster hard budget constraint and fiscal discipline. Regarding estimates of control variables in the production function of the province, the lag of log of output per capita (lnY(−1)) is significant and negative in all models, suggesting a convergent tendency of economic growth among Vietnam's provinces. The effects of partisan alignment on the allocation of intergovernmental transfers. Feld, L. P., Baskaran, T., and Schnellenbach, J. The Journal of Politics, 62(02), 350-368. Besides, the central fiscal transfers to local governments are designed to address the fiscal gap and horizontal and vertical imbalances across provinces including fiscal balancing transfers and targeted transfers. REFERENCES Dutch Disease, factor mobility, and the Alberta Effect: the case of federations. The province with below average governance has been assigned less fiscal responsibility than the province with above average governance. /Filter /FlateDecode (2014). (1993). The differential regional effects of monetary policy. Journal of Public Economics, 75, 493–506. We conclude that there is no general answer regarding the net effect of FD. Fiscal Decentralization and Economic Growth in OECD Countries Is There a Relationship? The Journal of International Trade & Economic Development. Journal of Public Economics, 91(3), 451-479. Fiscal decentralization contributes to economic growth: evidence from state-level cross-section data for the United States.

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