The impact of recentralisation on FDI : evidence from a quasi-natural experiment
Abstract
Although decentralised governance has been one of the most salient political regimes worldwide over the past few decades, many countries have started to realise various shortcomings associated with their decentralisation process. As a consequence, a number of central governments have attempted to pursue recentralisation reforms in order to reclaim authority from the localities. This government reform can lead to significant changes in institutional arrangements, and subsequently, may influence various aspects of socio-economic activities. However, the real impact of recentralisation reform still remains ambiguous. In this paper, we examine how recentralisation may affect foreign direct investment (FDI) inflows. We exploit the pilot recentralisation reform that temporarily abolished the intermediate legislative branches in some provinces in Vietnam as a quasi-natural experiment. The result shows that recentralisation leads to a significant reduction in FDI inflows. Our results are robust to a number of sensitivity analyses and falsification tests. Overall, our findings contribute to the literature on the determinants of FDI and provide new evidence on the real effect of recentralisation reform.
Citation
Luu , H N , Nguyen , M N & Nguyen , H T 2022 , ' The impact of recentralisation on FDI : evidence from a quasi-natural experiment ' , Post-Communist Economies , vol. Latest Articles . https://doi.org/10.1080/14631377.2022.2029252
Publication
Post-Communist Economies
Status
Peer reviewed
ISSN
1463-1377Type
Journal article
Description
This research is funded by Vietnam National Foundation for Science and Technology Development (NAFOSTED) under Grant No. 502.02-2020.09.Collections
Items in the St Andrews Research Repository are protected by copyright, with all rights reserved, unless otherwise indicated.