The Nuanced Effects of Fiscal Decentralisation on Local Economic Growth: A Spatial Perspective from Vietnam*

This study examines the impacts of fiscal decentralisation and spatial proximity on local economic growth in Vietnam, utilising panel data from 63 provinces and cities during the period 2011–2020. Spatial panel econometric models are employed to capture both the direct and indirect effects of these factors. The findings reveal that fiscal decentralisation has a positive effect on economic growth through the ratio of central government budget subsidise to local funding, while local public expenditure exerts a positive influence. Spatial proximity demonstrates substantial positive spillover effects; however, spatial competition and institutional influence from neighbouring provinces appear minor and statistically insignificant. These results underscore the critical roles of fiscal autonomy, local governance and regional spillovers in fostering local economic growth in Vietnam, offering valuable insights into the relationships between fiscal decentralisation, local growth and regional spillovers.