Regional income convergence in an emerging Asian economy: empirical evidence from Vietnam

Abstract

ABSTRACT Vietnam as an emerging economy has experienced strong economic growth since 1990 with an average annual income per capita growth of 8.8 per cent for 1990–2018. The country has around sixty provinces, and applying cross-section and time-series tests of convergence the analysis shows that approximately half of these have experienced a process of convergence towards the income level of Ho Chi Minh City (HCMC). Still, cities like HCMC and Ha Noi have a per capita income level several times higher than the lowest income provinces. The analysis also finds that provinces being a neighbour to the major city areas – and having more manufacturing and service industry activities than agriculture – are more likely to experience a process of economic convergence towards HCMC. This is also revealing that provinces having an infrastructure that can attract and adopt investments – being foreign investments or government funded activities – appear more likely to catch up with the high-income areas.