Political Connections and Investment in Rural Vietnam

UNU-WIDER working paper 07/2011; 2011/37

Posted: 14 Dec 2014

See all articles by Finn Tarp

Finn Tarp

University of Copenhagen - Department of Economics

Thomas Markussen

University of Copenhagen - Department of Economics

Date Written: July 1, 2011

Abstract

This paper uses household panel data from rural Vietnam to explore the effects of having a relative in a position of political or bureaucratic power on farmers’ agricultural investment decisions. Our main result is that households significantly increase their investment in land improvement as a result of relatives moving into public office. Connections to office holders appear to be important for investment because they strengthen de facto land property rights and improve access to off-farm employment and to informal loans. The findings underline the importance of informal networks for economic behaviour in environments with developing institutions and markets. They also suggest the presence of an untapped potential for economic development: if households without connections could obtain equally strong property rights and access to credit and insurance as the well-connected households, investment levels would rise substantially.

Keywords: political connections, informal networks, land property rights, investment, credit, Vietnam

JEL Classification: D73, H7, O12, Q15

Suggested Citation

Tarp, Finn and Markussen, Thomas, Political Connections and Investment in Rural Vietnam (July 1, 2011). UNU-WIDER working paper 07/2011; 2011/37, Available at SSRN: https://ssrn.com/abstract=2537903

Finn Tarp (Contact Author)

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Thomas Markussen

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

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