Provincial income convergence in Vietnam: spatio-temporal dynamics and conditioning factors

Abstract

AbstractIn this article, we use a three-step procedure that combines the log t convergence test, Explanatory Spatial Data Analysis, and ordered logit regression to determine the spatio-temporal dynamics and determinants of provincial income clustering in Vietnam during the 2010–2020 period. Our findings are three-fold. First, provincial income clustering in Vietnam follows patterns of club convergence towards multiple equilibria. Seven convergence clubs encompassing 61 provinces are identified. Second, spatial autocorrelation encourages neighboring provinces to converge toward shared income equilibria. High-income clusters are observed in the Northern and Southern Key Economic Regions, while low-income clusters are concentrated in the mountainous areas of Northern Vietnam. Finally, both internal and external factors significantly affect the formation of convergence clubs. Vital internal factors include localities’ initial conditions of physical capital and structural change. Meanwhile, external factors refer to spatial externalities among neighboring provinces. We highlight spatial complementarity in physical capital accumulation and spatial competition in industrial intensification among neighboring provinces.