Dang, D Anh (2010): Trade Liberalization and Institutional Quality: Evidence from Vietnam.
Download (742kB) | Preview
Recent cross-country research shows that there is a causal relationship between trade liberalization and quality of institutions. The literature on cross-country studies has been criticized because differences in legal systems and other institutions across countries are difficult to control for. An in-depth case study of a particular country’s experience can provide a useful complement to cross-country regressions. Using the unique dataset from provincial competitiveness survey and a natural experiment from joining the World Trade Organization, I find that variations in economic institutions across provinces in Vietnam can be explained by trade liberalization. To overcome endogeneity problems, I use minimum distance from each province to main economic centres as an instrument for trade liberalization. The instrumental variable approach shows that the direction of influence is from greater openness to better institutions. The results hold after controlling for various additional covariates. It is also robust to various alternative measures of institutions. I also find that trade liberalisation has greater short term impacts on institutional quality in the Northern provinces.
|Item Type:||MPRA Paper|
|Original Title:||Trade Liberalization and Institutional Quality: Evidence from Vietnam|
|English Title:||Trade Liberalization and Institutional Quality: Evidence from Vietnam|
|Keywords:||Trade liberalization, institutions, Vietnam|
|Subjects:||O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O43 - Institutions and Growth
F - International Economics > F1 - Trade
|Depositing User:||Anh D Dang|
|Date Deposited:||03. Nov 2010 09:08|
|Last Modified:||30. Dec 2015 09:12|
Acemoglu, D., 2009. ‘Introduction to modern economic growth’, Princeton University Press, New Jersey.
Acemoglu, D., Johnson, S. and Robinson, J., 2001. ‘The colonial origins of comparative development: an empirical investigation’, American Economic Review, 91(5): 1369-1401.
Acemoglu, D., Johnson, S. and Robinson, J., 2002. ‘Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution,’ Quarterly Journal of Economics, 117: 1231-1294.
Acemoglu, D. and Johnson, S., 2005. ‘Unbundling Institutions,’ Journal of Political Economy, 113(5): 949-995.
Acemoglu, D. and Robinson, J., 2006. ‘Economic Origins of Dictatorship and Democracy,’ Cambridge University Press, New York.
Ades, A. and Di Tella, R., 1999. ‘Rents, Competition and Corruption’, American Economic Review, 89(4): 982-993
Alesina, A., Ozler, S., Roubini,N., and Swagel, P.,1996. ‘Political Instability and Economic Growth’, Journal of Economic Growth, 1(2): 189-212.
Barro, R., 1997. ‘The Determinants of Economic Growth: A Cross-Country Empirical Study’, Cambridge, MIT Press.
Bates, R. and Krueger, A., 1993. ‘Political and economic interactions in economic policy reform : evidence from eight countries’, edited by Robert H. Bates and Anne O. Krueger, Blackwell, Oxford, U.K.
Baum, C., Schaffer, M., and Stillman, S., 2003. ‘Instrumental Variables and GMM: Estimation and Testing’, Stata Journal, 3(1): 1-31.
Beck, T., and Levine, R., 2004. ‘Legal Institutions and Financial Development’, NBER Working Papers, 10417, National Bureau of Economic Research.
Bolaky, B., and Freund, C., 2004. ‘Trade, regulations, and growth’, World Bank Policy Research Paper, 3255.
Cai, H., and Treisman, D., 2005. ‘Does Competition for Capital Discipline Governments? Decentralization, Globalization, and Public Policy’, American Economic Review, 95(3): 817-830.
Conley, T., Hansen, C., and Rossi, P., 2008. ‘Plausibly Exogenous’, Mimeo, Graduate School of Business, University of Chicago.
Dang, A., and Baker, P., 2008. ‘Post WTO Accession: Initial Macroeconomic Impacts on Vietnam’, Manuscript.
Dinh, B., 2009. ‘Investment Behavior by Foreign Firms in Transition Economies: The Case of Vietnam’, PhD Dissertation, University of Trento, Italy.
Dollar, D., and Kraay, A., 2003. ‘Institutions, Trade and Growth’, Journal of Monetary Economics, 50(1): 133-162.
Do, T. and Levchenko, A., 2009. ‘Trade, Inequality, and the Political Economy of Institutions’, Journal of Economic Theory, 144: 1489-1520.
Dowrick, S. and Golley, J., 2004. ‘Trade Openness and Growth: Who Benefits?’, Oxford Review of Economic Policy, 20: 38–56.
Duncan, R. and Doan, Q., 2003. ‘Trade Liberalisation, Economic Growth and Poverty Reduction Strategies’, downloaded at http://www.ausaid.gov.au , access at 12 January 2010.
Easterly, W. and Levine, R., 2003. ‘Tropics, Germs, and Crops: How Endowments Influence Economic Development’, Journal of Monetary Economics, 50(1): 3-39.
Edwards, S., 1998. ‘Openness, Productivity and Growth: What do we really know?’, Economic Journal, 108.
Edwards, S., 1993. "Trade Policy, Exchange Rates and Growth," NBER Working Papers 4511, National Bureau of Economic Research.
Engerman, S., and Sokoloff. K., 1997. ‘Factor Endowments: Institutions, and Differential Paths of Growth Among New World Economies’, in Stephen H. Haber ed. How Latin America Fell Behind, Stanford University Press, Stanford.
General Statistics Office, Vietnam, 2009. ‘Socio-Economic Statistical Data of 63 provinces and cities’, Statistical Publishing House, Hanoi.
Glaeser, E., LaPorta, R., Lopez-de-Silanes, F., and Shleifer, A., 2004. ‘Do Institutions Cause Growth?’, Journal of Economic Growth, 9: 271-303.
Greenaway, D., and Sapsford, D., 1994. ‘What does liberalisation do for exports and growth?’, Review of World Economics, 130(1): 152-174.
Hale, G., and Long, C., 2006. ‘Firm Ownership and FDI Spillovers in China’, Stanford Center for International Development.
Harrison, A., and Hanson, G., 1999. ‘Who gains from trade reform? Some remaining puzzles’, Journal of Development Economics, 59(1): 125-154.
Hausman, J., Stock, J. and Yogo, M., 2005. ‘Asymptotic Properties of the Hahn-Hausman Test for Weak Instruments’, Economics Letters, 89(3): 333-342.
Irwin, A., and Tervio, M., 2000. ‘Does Trade Raise Income? Evidence From the Twentieth Century’, NBER Working Paper, 7745, National Bureau of Economic Research.
Islam, R., and Montenegro, C., 2002. What determines the Quality of Institutions?, Policy Research Working Paper, World Bank.
Jellema, J., and Roland, G., 2009. ‘Institutional cluster and economic performance’, Manucript, University of California, Berkeley.
Jensen, N., and Rosas, G., 2007. ‘Foreign Direct Investment and Income Inequality in Mexico, 1990-2000, International Organization, 61(3): 467-487.
Jong-sung, Y. and Khagram, S., 2005. ‘A Comparative Study of Inequality and Corruption’, American Sociological Review, 70: 136-157.
Knack, S., and Keefer, P., 1995. ‘Institutions and Economic Performance: Cross-Country Tests using Alternative Institutional Measures,’ Economics and Politics, 7: 207-227.
La Porta, R., Lopez-de-Silanes,F., Shleifer, A., and Vishny, R., 1999. ‘The Quality of Government’, Journal of Law, Economics and Organization, 15(1): 222-279.
La Porta, R., Lopez-de-Silanes,F., Pop-Eleches, P., and Shleifer, A., 2004. ‘Judicial Checks and Balances’, Journal of Political Economy, 112(2): 445-470.
Lipset, S., 1959. ‘Some Social Requisites of Democracy: Economic Development and Political Legitimacy’, American Political Science Review, 53: 69-105
Malesky, E., and Taussig, M., 2009. ‘Out of Gray: The Impact of Provincial Institutions on Business Formalization in Vietnam’, Journal of East Asian Studies, 9(2): 249-90.
Malesky, E., 2009. ‘Foreign Direct Investors: Agents of Economic Transition. An Instrumental Variables Analysis’, Quarterly Journal of Political Science, 4(1): 59-85.
Malesky, E., 2008. ‘Straight Ahead on Red: How Direct Investment Empowers Sub-national Leaders’, Journal of Politics, 70(1): 97-119.
Malesky, E., 2007. ‘The Vietnam Provincial Competitive Index 2007: Measuring Economic Governance for Private Sector Development’, USAID and VCCI, Hanoi.
Mauro, P., 1995. ‘Corruption and Growth’, Quarterly Journal of Economics, 110(3): 681-712.
Pincus, J., 2009. ‘Governance’, Fulbright Economics Teaching Program, available at http://ocw.fetp.edu.vn. Download on 21/9/2010.
Pinto, P., and Zhu, B., 2008. ‘Fortune or Evil? The Effect of Foreign Direct Investment on Corruption’, Working Paper, Saltzman Institute of War and Peace Studies (SIWPS).
Pritchett, L., 1996. ‘Measuring outward orientation in LDCs: Can it be done?’, Journal of Development Economics, 49(2): 307-35
Rodriguez, F., and Rodrik, D., 2000. ‘Trade Policy and Economic Growth: A Skeptics Guide to Cross-National Evidence,’ in B. Bernanke and K. Rogoff eds., NBER Macroeconomics Annual 2000, Cambridge (MA), MIT Press.
Rodrik, D., (ed.) 2003. ‘In Search of Prosperity: Analytic Narratives on Economic Growth’, Princeton University Press, Princeton, NJ.
Rodrik, D., 2000a. ‘Institutions for High-Quality Growth: What They Are and How to Acquire Them,’ Studies in Comparative International Development, 35(3): 3-31.
Rodrik, D., 2000b. ‘Trade Policy Reform as Institutional Reform,’ in Bernard Hoekman (ed.), Handbook on Developing Countries and the Next Round of WTO Negotiations.
Rodrik, D., 1999a. ‘The new global economy and developing countries: making openness work’, Overseas Development Council.
Rodrik, D., 1999b. ‘Where Did All the Growth Go? External Shocks, Social Conflict,and Growth Collapses’, Journal of Economic Growth, 4(4): 385- 412.
Rodrik, D., Subramanian, A., and Trebbi, F., 2004. ‘Institutions Rule: the Primacy of Institutions over Geography and Integration in Economic Development,’ Journal of Economic Growth, 9: 131-165.
Sachs, J., and Warner, A., 1995. ‘Economic reform and the process of global integration,’ Brookings Papers on Economic Activity, 1: 1-118.
Shirk, L., 1994. ‘How China Opened Its Door: the Political Success of the PRC’s Foreign Trade and Investment Reform’, The Brookings Institution, Washington.
Simmons, B., and Elkins, Z., 2004. ‘The Globalization of Liberalization: Policy Diffusion in the International Political Economy’, American Political Science Review, 98(1):171-189.
Staiger, D. and Stock, J., 1997. ‘Instrumental Variables Regression with Weak Instruments’, Econometrica, 65: 557-586.
Tiebout, C., 1956. ‘A Pure Theory of Local Expenditures’, Journal of Political Economy, 64 (5): 416-24.
Treisman, D., 2000. “The Causes of Corruption: A Cross National Study.” Journal of Public Economics, 76: 399–457. USAID, 2008. ‘Supporting Vietnam’s Legal and Governance Transformation’, Technical Report.
Wei, S., and Wu, Y., 2001. ‘Globalization and Inequality: Evidence from Within China’, NBER Working Papers, 8611, National Bureau of Economic Research.
Vu, A., Le, T. and Vo, T., 2007. ‘Provincial Extralegal Investment Incentives in the Context of Decentralisation in Viet Nam: Mutually Beneficial or a Race to the Bottom?’, United Nations Development Program Vietnam Working Paper Series, Hanoi, Vietnam.
Zhu, B., 2009. ‘Economic Integration and Corruption: The Case of China’, Paper prepared for the Annual Conference of International Political Economy Society in College Station.
Zweig, D., 2002. ‘Internationalizing China’, Cornell University Press, Ithaca.
Available Versions of this Item
- Trade Liberalization and Institutional Quality: Evidence from Vietnam. (deposited 03. Nov 2010 09:08) [Currently Displayed]