Application of Solow model to evaluate the impact of PAPI on economic growth of locals in Vietnam
Abstract
Institutions play a vital role in economic development in many countries. Assessing the impact of Provincial Governance and Public Administration Performance (PAPI) and its components on economic growth is an important issue that contributes to institutional improvement. This study uses a combination of the PAPI data set of 63 provinces and cities in Vietnam for the period 2011-2018 and the statistical yearbook to assess the impact of PAPI on local economic growth using FEM, REM methods. The model is based on the theoretical foundation of the Solow model that increasing in productive capital only affects economic growth in the short term but does not affect in the long run, growth reach a steady state.The reseach results showed that, There did not exist the relationship between PAPI and economic growth, but the study found a positive relationship of three component indicators, namely (i) Control of Corruption in the public sector, (ii) Public Administration Procedures and (iii) Public Service Delivery, At the same time, the study also pointed out the negative effects of two component indicators, namely (i) Openness and Transparency in decision making and (ii) Accountability to residents on economic growth of locals in Vietnam.