Straight Ahead on Red: How Foreign Direct Investment Empowers Subnational Leaders

Journal of Politics, Vol. 70, No. 1, pp. 97-119, January 2008

23 Pages Posted: 1 Sep 2010

See all articles by Edmund J. Malesky

Edmund J. Malesky

Duke University, Political Science

Date Written: August 31, 2010

Abstract

This paper tests the hypothesis that increasing stocks of foreign direct investment (FDI) can lead to de facto decentralization in the form of autonomous reform experiments by subnational leaders. Because these reform experiments may attract FDI in subsequent years, there is a possibility of endogeneity. As a result, the methodology is a simultaneous equation model of 61 Vietnamese provinces between 1990 and 2000. Stocks of FDI as a percentage of GDP are regressed on a measure of autonomy derived from a content analysis of Vietnamese state-owned newspapers. Every time a province is cited in the papers for violating central laws on economic policy by engaging in reform experimentation, it is coded as a case of autonomy. The central question of the analysis is: how much FDI is needed for a province to believe it has the bargaining power to challenge central authority for the first time in a given year? Using this approach, I find strong evidence for the influence of FDI on local autonomous economic reform experiments.

Keywords: Foreign Direct Investment, Vietnam, Provincial Governance, Decentralization

JEL Classification: F15, F23

Suggested Citation

Malesky, Edmund J., Straight Ahead on Red: How Foreign Direct Investment Empowers Subnational Leaders (August 31, 2010). Journal of Politics, Vol. 70, No. 1, pp. 97-119, January 2008. Available at SSRN: https://ssrn.com/abstract=1669607

Edmund J. Malesky (Contact Author)

Duke University, Political Science ( email )

140 Science Drive (Gross Hall), 2nd floor
Duke University Mailcode: 90204
Durham, NC 27708-0204
United States

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