TAILIEUCHUNG - Subnational governance institutions and the development of private manufacturing enterprises in Vietnam

Subnational governance institutions and the development of private manufacturing enterprises in Vietnam. This paper examines the impacts of subnational governance institutions on the development of private manufacturing firms in terms of new entry, firm size and labor productivity growth during 2006-2014 in Vietnam. | Journal of Economics and Development, , , April 2017, pp. 5-24 ISSN 1859 0020 Subnational Governance Institutions and The Development of Private Manufacturing Enterprises in Vietnam Bach Ngoc Thang National Economics University, Vietnam Email: thangbn@ Abstract This paper examines the impacts of subnational governance institutions on the development of private manufacturing firms in terms of new entry, firm size and labor productivity growth during 2006-2014 in Vietnam. Vietnam’s context during this period provides the best opportunities for examining the effects of subnational institutions on the entry and growth of private firms, given vast differences in the institutional quality across provinces and the increasing contribution of the private sector to the national economy. The empirical results suggest that aspects of the provincial governance institutions differ significantly in terms of their effects on private firms’ entry and growth during the study period. The conventional approach of entry deregulation seems to not induce the entry and sustained growth of private firms, but more fundamental aspects of transparency, private property protection, and contract enforcement better serve the private sector development over longer time horizons. These findings have important implications for the next stage of institutional reforms in a transitional economy such as that of Vietnam. Keywords: Governance institutions; entry regulation; firm entry; labor productivity growth. Journal of Economics and Development 5 Vol. 19, , April 2017 1. Introduction subject to heavy regulations and discrimination (World Bank, 2005). It was not until the Enterprise Law in 2000 that the State’s mindset was drastically changed in regulating the private sector. The law greatly simplified the business registration procedures where the business community were allowed to “register first, then to check”. Accordingly, hundreds of business licenses were .

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