Provincial government spending on socio-cultural issues and tourism development in Vietnam

While the relationship between government spending and economic development is well established, few have examined government investment in socio-cultural issues related to the development of local tourism. The gap in the literature and the importance of this topic have motivated the researchers to conduct this study. Given this fact, the main aim of the study is to examine how government spending on socio-cultural issues affected local tourism revenue in 63 provinces and cities in Vietnam over the period from 2010 to 2019. The study uses panel data for 63 provinces and cities, spanning from 2010 to 2019, and employs a generalised method of moments (GMM) estimator, which takes into account the issues with simultaneity, omitted unobserved time-invariant variables, and potential dynamic endogeneity in the econometric model. The study shows that for a one percentage point increase in local government spending on socio-cultural issues, revenue from local tourism increases by 0.676%, and overall revenue by 0.790%, 2.106%, and 0.355% in the northern, central, and southern regions of Vietnam respectively. The study helps to explain the mechanism whereby local government expenditure influences the development of tourism via (i) an increase in the number of returning tourists; and (ii) an increase in local tourism-related services and goods transactions, reflected in the number of goods transported across the locality.