IMPACT OF PUBLIC INVESTMENT GOVERNANCE ON PROVINCES’ ECONOMICS GROWTH: A SPATIAL APPROACH

Abstract

The objective of this study is to evaluate the impact of public investment on the economic growth of the province in Vietnam, with a focus on a spatial perspective to uncover its effects. Applying the quasi-maximum likelihood (quasi-ML) estimation method developed by Belotti et al. (2017) to balanced panel data and conducting various tests, we identified the spatial Durbin model (SDM) as the most appropriate spatial model for the studied data. The importance of public investment in local economic growth is highlighted by an empirical analysis of 63 Vietnamese provinces from 2010 to 2020. Notably, taking spatial interactions into account, the finding reveals the existence of spillover effects of economic growth and public investment, demonstrating the impact of economic growth and public investment from one province on the economic growth of adjacent provinces. We incorporate the impact of foreign direct investment (FDI) in the analysis to highlight the role of public investment in economic growth in the long run. While FDI also has positive impacts on regional growth and has direct effects on neighboring provinces’ growth, it also has an adverse impact in terms of (indirect) spillover effects.