Management decentralization in public investment and economic growth in Vietnam

Abstract

Empirical evidence obtained using a vector autoregressive (VAR) model with quarterly data from the first quarter of 2014 to the third quarter of 2024 indicates that 1% increase in public investment management decentralization raises Vietnam’s economic growth rate by 0.5% in the initial quarter. However, the effect diminishes and decays after eight quarters. At subnational tiers, decentralization at province and district tiers contributes positively to economic growth, whereas decentralization at commune tier exerts a negative effect. This result can be attributed to the fact that decentralization is most effective at province tier, where decision-making authority is appropriately aligned with investment responsibilities. While decentralization at district tier remains beneficial, its impact is weaker, and becomes least effective at commune tier.