Foreign direct investment and economic growth in Vietnam

By making use of a recently released panel dataset that covers 61 provinces of Vietnam from 1996–2005, this study examines the link between foreign direct investment and economic growth. Our analysis, which is based on a simultaneous equations model, reveals that in overall terms a mutually reinforcing two-way linkage between FDI and economic growth exists in Vietnam. However, this is not the case for each and every region of Vietnam. The results presented in this study suggest that the impact of foreign direct investment on economic growth in Vietnam will be larger if more resources are invested in education and training, financial market development and in reducing the technology gap between the foreign and local firms.

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