Do Good Governance and Public Administration Improve Economic Growth and Poverty Reduction? The Case of Vietnam

ABSTRACT:

In this study, we examine how governance and public administration quality can affect per capita income, income inequality, and poverty using provincial-level data in Vietnam. Governance and public administration quality are measured by the Vietnam Governance and Public Administration Performance Index (PAPI) surveys, which collect data on citizens’ experiences with and perception of provincial performance in governance and public. Using province fixed-effect regressions, we find a positive and nonlinear association between governance and public administration and per capita income. Better performance of governance and public administration also appears to improve income distribution and reduces poverty. The association between governance quality and poverty severity is larger than the association between governance quality and poverty headcount. This finding implies that, within a province, better governance and public administration are most beneficial for the poorest of the poor.

Notes

1 For instance, UNDP (1997) defines governance as the exercise of economic, political, and administrative authority to manage a country’s affairs at all levels. Governance comprises mechanisms, processes, and institutions through which citizens and groups articulate their interests, exercise their legal rights, meet their obligations, and mediate their differences. Kaufmann et al. (1999) refer to governance as the traditions and institutions by which authority in a country is exercised for the common good. This definition includes the process by which those in authority are selected, monitored, and replaced, and the capacity of the government to effectively manage its resources and implement sound policies. Different definitions result in various measures of governance, with differing variables of interest, such as rule of law and anti-corruption, political stability, voice and accountability, and absence of violence.

2 For detailed information about the data source, see www.papi.vn/en

3 We cannot estimate the per capita expenditure index and the expenditure poverty index at the provincial level, since the samples of VHLSS containing expenditure data are not representative at the provincial level.

4 Kinh is Vietnamese and Hoa is Chinese. Only a small number of residents are Hoa, but they generally enjoy a high socioeconomic status and live primarily in urban areas. For these reasons, Hoa are often grouped with Kinh in poverty analyses.

5 See Acemoglu, Johnson, and Robinson (2001) for a discussion of the issues and efforts to control for bi-directional causation.

Additional information

Notes on contributors

Cuong Viet Nguyen

Cuong Viet Nguyen ([email protected]) is a researcher in 1) Informetrics Research Group, Ton Duc Thang University, Ho Chi Minh City, Vietnam; and 2) Faculty of Social Sciences and Humanities, Ton Duc Thang University, Ho Chi Minh City, Vietnam. His main field is development economics, poverty reduction and impact evaluation.

Long Thanh Giang

Long Thanh Giang ([email protected]) is an associate professor in 1) National Economics University, Hanoi, Vietnam; and 2) Institute of Social and Medical Studies, Hanoi, Vietnam. His research interests include the economics of aging and micro-simulation of anti-poverty programs for the older persons, particularly for Viet Nam, Indonesia, and Myanmar.

Anh Ngoc Tran

Anh Ngoc Tran ([email protected]) is an associate professor at the School of Public and Environmental Affairs, Indiana University Bloomington, specializing in the governance issues of developing countries. Tran’s current research focuses on transparency, tax evasion, corruption, political networks, and their economic and social outcomes.

Huyen Thanh Do

Huyen Thanh Do ([email protected]) is an expert with the United Nations Development Program, Hanoi, Vietnam. She currently focuses on governance and public administration studies in Vietnam.