Does better local governance improve district growth performance in Indonesia?

A large literature suggests that countries with better governance have higher growth rates. We explore whether this is also true at the sub-national level in Indonesia. We exploit a new dataset of firm perceptions of the quality of economic governance in 243 districts across Indonesia to estimate the impact of nine different dimensions of governance on district growth. Surprisingly, we find relatively little evidence of a robust relationship between the quality of governance and economic performance. However, we do find support for the idea that structural variables, such as economic size, natural resource endowments and population, have a direct influence on the quality of local governance as well as on economic growth. This suggests that efforts to improve local governance should pay greater attention to understanding how such structural characteristics shape the local political economy and how this in turn influences economic performance.governance, institutions, economic performance, economic growth

Rent(s) Asunder: Sectoral Rent Extraction Possibilities and Bribery by Multinational Corporations

We argue that openness to foreign investment can have differential effects on corruption, even within the same country and under the exact same domestic institutions over time. Our theoretical approach departs from standard political economy by attributing corruption motives to firms as well as officials. Rather than interpreting bribes solely as a coercive "tax" imposed on business activities, we allow for the possibility that firms may be complicit in using bribes to enter protected sectors. Thus, we expect variation in bribe propensity across sectors according to expected profitability which we proxy with investment restrictions. Specifically, we argue that foreign investment will not be associated with corruption in sectors with fewer restrictions and more competition, but will increase dramatically as firms seek to enter restricted and uncompetitive sectors that offer higher rents. We test this effect using a list experiment, a technique drawn from applied psychology, embedded in a nationally representative survey of 10,000 foreign and domestic businesses in Vietnam. Our findings show that the impact of domestic reforms and economic openness on corruption is conditional on polices that restrict competition by limiting entry into the sector.Corruption, Bribery, Rents, Foreign Direct Investment, Multi-National Corporations, World Trade, Organization, Restrictions, List Question, FDI, MNC, UCT, WTO

FDI incentives pay—politically

The authors find that there are strong political benefits to attracting FDI at the state-level in the United States, and that fiscal incentives for attracting such investment, regardless of their effectiveness, may be a strategic political tool for state politicians

Does Better Provincial Governance Boost Private Investment in Vietnam?

A large literature asserts a causal relationship between the quality of economic governance and economic performance. However, attempts to establish such a link at an aggregate level have met with considerable methodological criticism. This paper seeks to overcome this limitation. We match a panel of Vietnamese enterprises from 2006-2010 with a unique panel dataset measuring sub-national economic governance, and then exploit rules on the terms of local leaders and the mandatory retirement age to try to estimate a causal link between local governance and domestic private investment. With one exception, we do not find a significant relationship between most aspects of local economic governance and private investment. The exception is transparency, which is strongly associated with higher investment, although the weakness of our instruments makes it difficult to determine the size of the effect. Our results have significant implications for policy, given the prevailing assumption that changes in the quality of local economic governance will spur improved economic performance

Does Better Local Governance Improve District Growth Performance in Indonesia?

A large literature suggests that countries with better governance have higher growth rates. We explore whether this is also true at the sub-national level in Indonesia. We exploit a new dataset of firm perceptions of the quality of economic governance in 243 districts across Indonesia to estimate the impact of nine different dimensions of governance on district growth. Surprisingly, we find relatively little evidence of a robust relationship between the quality of governance and economic performance. However, we do find support for the idea that structural variables, such as economic size, natural resource endowments and population, have a direct influence on the quality of local governance as well as on economic growth. This suggests that efforts to improve local governance should pay greater attention to understanding how such structural characteristics shape the local political economy and how this in turn influences economic performance

The Impact of Recentralization on Public Services: A Difference-in-Differences Analysis of the Abolition of Elected Councils in Vietnam

Comparative political economy offers a wealth of hypotheses connecting decentralization to improved public service delivery. In recent years, influential formal and experimental work has begun to question the underlying theory and empirical analyses of previous findings. At the same time, many countries have grown dissatisfied with the results of their decentralization efforts and have begun to reverse them. Vietnam is particularly intriguing because of the unique way in which it designed its recentralization, piloting a removal of elected People’s Councils in ninety-nine districts across the country and stratifying the selection by region, type of province, and urban versus rural setting. We take advantage of the opportunity provided by this quasi-experiment to test the core hypotheses regarding the decision to shift administrative and fiscal authority to local governments. We find that recentralization significantly improved public service delivery in areas important to central policy-makers, especially in transportation, healthcare, and communications

The Impact of Recentralization on Public Services: A Difference-in-Differences Analysis of the Abolition of Elected Councils in Vietnam

Comparative political economy offers a wealth of hypotheses connecting decentralization to improved public service delivery. In recent years, influential formal and experimental work has begun to question the underlying theory and empirical analyses of previous findings. At the same time, many countries have grown dissatisfied with the results of their decentralization efforts and have begun to reverse them. Vietnam is particularly intriguing because of the unique way in which it designed its recentralization, piloting a removal of elected People’s Councils in ninety-nine districts across the country and stratifying the selection by region, type of province, and urban versus rural setting. We take advantage of the opportunity provided by this quasi-experiment to test the core hypotheses regarding the decision to shift administrative and fiscal authority to local governments. We find that recentralization significantly improved public service delivery in areas important to central policy-makers, especially in transportation, healthcare, and communications

Globalization and state capitalism: assessing Vietnam's accession to the WTO

What do state-owned enterprises (SOEs) do? How do they respond to market incentives? Can we expect substantial efficiency gains from trade liberalization in economies with a strong presence of SOEs? Using a new dataset of Vietnamese firms we document a set of empirical regularities distinguishing SOEs from private _rms. Then we empirically study the effect of the 2007 WTO accession on selection, competition, and productivity. Our results show that WTO entry is associated with higher probability of exit, lower firm profitability, and substantial increases in productivity for private firms but not for SOEs. Our estimates suggest that the overall productivity gains would have been about 40% larger in a counterfactual Vietnamese economy without SOEs. We highlight some economic mechanisms possibly driving these findings through the lenses of a model of trade with heterogeneous private and state-owned firms. The model suggests that political/regulatory barriers to entry and access to credit are key drivers of the different response of SOEs to trade liberalization. Further empirical tests broadly validate these insights

The Model of Reality: Assessment of Vietnamese SOE Reform--Implementation at the Firm Level

http://deepblue.lib.umich.edu/bitstream/2027.42/39542/3/wp154.pd