The role of spatial structure in driving the pace of structural economic change: empirical evidence from Vietnam

Abstract

ABSTRACT Both structural economic change and spatial structure are central themes of modern economics. At the same time, they are also the objects of interest of policymakers to ensure the sustainable development of the economy. However, up until now, these topics have been studied in isolation, with no previous research exploring the relationship between them. This study examines the influence of features in the spatial structure on the structural economic change process. The spatial structure is firstly described through urbanization externalities with two dimensions: polycentricity and dispersion. In which the degree of polycentricity is measured by the slope of the regression line of the rank-size distribution. In addition, to control for bias due to omitting essential variables and potential two-way relationships of spatial structure on the structural economic change, this study uses instrumental variables combined with two-stage least squares regression analysis (TSLS) based on the empirical data of a typical developing country, Vietnam. The study results show that urban externalities are reflected through the urban population size, which positively impacts the change in localities’ economic structure. In contrast, the population dispersion following a decentralized model brings negative effects. In addition, when the spatial structure of localities tends to be highly polycentric, it will have a negative impact on the structural economic change; however, this effect is dominated by the size of the urban population. The findings from this study make an essential contribution to providing relevant policy implications for the agendas of planning, regional spatial structure development, and structural economic change.