The Effect of Local Governance on Firm Productivity and Resource Allocation : Evidence from Vietnam
Governance quality plays a key role in private sector development: competent bureaucrats not only create good policies and regulations, but also effectively implement them to shape the business environment. This paper exploit Vietnam’s decentraliza...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/897751498567735812/The-effect-of-local-governance-on-firm-productivity-and-resource-allocation-evidence-from-Vietnam http://hdl.handle.net/10986/27622 |
| Summary: | Governance quality plays a key role in
private sector development: competent bureaucrats not only
create good policies and regulations, but also effectively
implement them to shape the business environment. This paper
exploit Vietnam’s decentralization of administrative tasks
since the early 2000s to test this hypothesis. The paper
examines how changes in the provincial administration of
national business regulations affect firms through two
channels: within-firm productivity levels and resource
allocation across firms. The results show that better
overall business environment has a positive impact on firm
productivity, and this effect is driven by a reduction in
corruption levels, the risks of land expropriation, and
entry regulations. The analysis also finds that
high-productivity firms are generally better able to take
advantage of improvements in the business environment.
However, better implementation of entry regulations matters
most for less productive firms. The study does not find
evidence for the impact of business environment quality on
province-level market efficiency. |
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