Can public administration explain economic performance: the case of sixty three provinces in Vietnam

UNIVERSITY OF ECONOMICS
HO CHI MINH CITY
VIETNAM

ERASMUS UNVERSITY ROTTERDAM
INSTITUTE OF SOCIAL STUDIES
THE NETHERLANDS

VIETNAM – THE NETHERLANDS
PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

CAN PUBLIC ADMINISTRATION EXLPAIN
ECONOMIC PERFORMANCE: THE CASE OF
SIXTY THREE PROVINCES IN VIETNAM

BY

HOANG HONG QUAN

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

HO CHI MINH CITY, December 2017

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UNIVERSITY OF ECONOMICS
HO CHI MINH CITY
VIETNAM

INSTITUTE OF SOCIAL STUDIES

THE HAGUE
THE NETHERLANDS

VIETNAM - NETHERLANDS
PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

CAN PUBLIC ADMINISTRATION EXLPAIN
ECONOMIC PERFORMANCE: THE CASE OF
SIXTY THREE PROVINCES IN VIETNAM
A thesis submitted in partial fulfilment of the requirements for the degree of
MASTER OF ARTS IN DEVELOPMENT ECONOMICS

By

HOANG HONG QUAN

Academic Supervisor:
PROF. DR. NGUYEN TRONG HOAI

HO CHI MINH CITY, December 2017

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DECLARATION
I,

HOANG HONG QUAN

declare that this thesis and all results concluded in it are my own effort and has been

generated by myself as the result of my own original research:
Can Public Administration Reform Explain Economic Performance: The Case Of Sixty
Three Provinces In Viet Nam.
I confirm that:
This work was done wholly or mainly while I have been in candidature for a
research degree at the Viet Nam - Netherlands Programme for M.A. in Development
Economics;
Where any part of this thesis has previously been submitted for a degree or any
other qualification at this programme or any academic institution, this has been clearly
stated;
All references; materials quoted from the work of others used in this thesis, the
source is always given. With the exception of such quotations, this thesis is entirely my
own work;
Either none of this work has been published before submission, or parts of this
work have been published

I am hereby responsible for my declaration

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ACKNOWLEDGEMENT
Here I would like to express my profound gratitude to thank my supervisor, Prof. Dr.
NGUYEN TRONG HOAI for his valuable and unconditional supporting, understanding
and supervising during the process of this thesis.
Besides, I would like to express my appreciation to the lecturers, staffs and members of
the Vietnam - Netherlands Program at University of Economics Ho Chi Minh city for
their willingness and priceless time helping me to enlarge knowledge and academic skills
which are the background of this thesis to be generated.
Next, I would like to thank doctor Ricardo Perez Truglia from Harvard University who

encourage the completion of this thesis with his data and materials as examples of data
processing techniques, also I would like to thank all of my classmates for their hard work,
which considered to be a typical example of surmounting challenges.
Lastly, I would like thank all of my friends, relatives and colleges for their unlimited
assist during the time of staying presence in my programme.

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ABBREVIATION

GDP:

Gross Domestic Product

GRDP:

Gross Regional Domestic Product

PA:

Public Administration

PAR:

Public Administration Reform

PAR-MP:

Public Administration Reform - Master Program

PSR:

Public Service Reform

MI:

Multiple Imputation

BMA:

Bayesian Modeling Average

PIP:

Posterior Inclusion Probability

FE:

Fixed Effects

DGMM:

Difference Generalized Methods of Moments

SGMM:

System Generalized Methods of Moments

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ABSTRACT
Economic growth can be explained using fundamental (De facto) cause and proximate
(De jure) ones. This study attempt to explore proximate nature which is of elements of
economic activities of Vietnam including institutional quality based on cross-province
dataset. The methodology adopted is informal growth regression, which allow to account
variables that represent the underlying as well as proxy for proximate causes of growth.
Multiple imputation (MI) technique is employed to deal with missing values of regressors
since some observations are measured each couple of years and missing values. Problem
of model uncertainty is addressed using approach for model selection named BMA
(Bayesian model averaging) to evaluate probability of including of predictors in growth
model. Variables flagged as being important by the above procedures then used in
formulating the final models. Using dataset collected from 63 provincial administrative
level units of Vietnam with 15 proximate determinants, which are proxy for public
administrative reform in Vietnamese context. Panel data difference GMM (DGMM) is
applied to examine in some detail and to deal with multicolinearity and endogenous
nature of data.
The results indicate that elucidating economic growth variations of provinces in context
of public administration would rather choose the fundamental group of variables than
group of proximate variables. For determinants of growth, an increase of public
expenditure and a high level of lagged GDP will help to significantly raise provincial
economic health. In context of institutional change, control of corruption is proved to
remarkably affect current economic well-beings. Moreover, with additional models of
estimations to quest for possible effects of all variables, the results show that the result of
focused model of this study are consistent and robust.

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CAN PUBLIC ADMINISTRATION REFORM EXPLAIN ECONOMIC GROWTH,
THE CASE OF SIXTY THREE PROVINCES IN VIET NAM.

Contents
DECLARATION
ACKNOWLEDGEMENT
ABBREVIATION
Equation Chapter 1 Section 1DECLARATION ............................................................................ iii
ACKNOWLEDGEMENT ........................................................................................................... iv
ABBREVIATION ......................................................................................................................... v
GDP:

Gross Domestic Product ................................................................................................... v

GRDP:
PA:

Gross Regional Domestic Product ................................................................................ v

Public Administration .......................................................................................................... v

PAR:

Public Administration Reform ......................................................................................... v

PAR-MP:
PSR:
MI:

Public Administration Reform - Master Program ..................................................... v

Public Service Reform ..................................................................................................... v
Multiple Imputation ............................................................................................................. v

BMA:

Bayesian Modeling Average ........................................................................................ v

PIP:

Posterior Inclusion Probability ......................................................................................... v

FE:

Fixed Effects ........................................................................................................................ v

DGMM:

Difference Generalized Methods of Moments ............................................................. v

SGMM:

System Generalized Methods of Moments ................................................................... v

ABSTRACT ................................................................................................................................... vi
ACKNOWLEDGEMENT .......................................................................................................... vii
ABBREVIATION ....................................................................................................................... vii
FIGURES ...................................................................................................................................... 10

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CHAPTER 1 INTRODUCTION .................................................................................................. 11
1.1 Problem statement ................................................................................................................... 11
1.2 Research gaps.......................................................................................................................... 14
1.3 Specification of research problem .......................................................................................... 15
1.4 Research objective and research questions ............................................................................. 17
1.5 Scope of study ......................................................................................................................... 18
1.6 Structure of the study .............................................................................................................. 19
CHAPTER 2 LITERATURE REVIEW ....................................................................................... 20
2. Literature review ....................................................................................................................... 20
2.1 Review of theory ..................................................................................................................... 20
2.1.1 Review research on institutional quality and economic growth .......................................... 20
2.1.2 Review research on public administration reform and national income.............................. 23
2.1.3 Concept of public administration and the nature ................................................................. 24
2.1.4 Public administration reform and its nature ......................................................................... 25
2.2 Theoretical framework ............................................................................................................ 28
2.2.1 Growth model and institutions-augmented growth model................................................... 29
2.2.2 Institutions-augmented growth model ................................................................................. 31
2.3 Empirical studies and methods applied................................................................................... 33
2.4 Institutional quality and economic Growth............................................................................. 36
CHAPTER 3 RESEARCH METHODOLOGY ........................................................................... 39
3.1 Measurements of institutional quality..................................................................................... 39
3.2 Linking public administration reform and economic growth. ................................................ 41
3.3 Analytical framework ............................................................................................................. 42
Econometric models...................................................................................................................... 48

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3.4 Data collections ....................................................................................................................... 53
3.5 Variables description .............................................................................................................. 54
3.5.1 The dependent variable – Gross domestic product at provincial level (GDP) .................... 55
3.5.2 Group of independent variables as fundamental cause of growth ....................................... 55
3.5.3 Group of variables as proximate cause of growth. .............................................................. 58
CHAPTER 4 RESEARCH RESULTS ......................................................................................... 62
4.1 OVERVIEW INSTITUTION AND ECONOMIC GROWTH IN VIETNAM ...................... 62
4.2 DESCRIPTIVE STATISTICS ................................................................................................ 62
4.2.1 SUMMARY OF MISSINGNESS ....................................................................................... 62
4.2.2 Filling in missing values ...................................................................................................... 64
4.2.3 Unit root tests ....................................................................................................................... 66
4.2.4 Bayesian model averaging ................................................................................................... 69
4.3 Analysis of the empirical results ............................................................................................. 72
4.4 Further analysis and discussions. ............................................................................................ 75
CHAPTER 5 CONCLUSIONS AND POLICY IMPLICATIONS ............................................. 81
5.1 Main findings and Policy implications ................................................................................... 81
5.2 Limitations and Further research recommendations. .............................................................. 84
Barro, Robert, J. “Inflation and Economic Growth.” NBER Working Paper No 5326, 1995. ..... 88

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FIGURES
Figure 1: values of Br after taking multiple imputation.
Figure 2: values of Lnpar after taking multiple imputation.
Figure 3 GDP estimated in conditions of control of corruption
TABLES
Table 1: missing patterns of variables
Table 2 Summary statistics
Table 3 Unit root tests for GDP estimations variables

Table 4: correlation matrix of variables
Table 5: result of Bayesian model averaging estimation
Table 6: results of model selection
Table 7 results analysis under FE and DGMM estimations
Table 8: estimated result using external variables
Table 9: comparison of predictive power of the models

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CHAPTER 1 INTRODUCTION
1.1 Problem statement
Since the presence of governance institution, the way of establishing central governments
and regional, provincial state bodies has always affect economic activities. The role of
institutions and governance as controlling, guiding, monitoring, facilitating means for
civil activities in general and economic ones for specific is always a much interesting
subject for political and economic scientists who have been emphasized this role as deep
determinants for growth. Differences in quality, way of organizing mechanism, citizen
participation and socializing rate of public services can be some good reasons of why
some countries grow rapidly, taking advantage of catching up opportunities and get richer
while others falling behind (Olson et al. 2002). This is of most trite yet crucial question in
field of economic growth. These differences were explained by traditional neoclassical
growth model, following Solow (1956), Cass (1965) and Koopmans (1965) using income
per capita in terms of different paths of factor accumulation (saving rates, total factor
productivity). Differences in national income in these models, however, are not explained
by variation in institutions.
Growth theories, in common sense, emphasized that sustained steady-state growth could
be induced by externalities from physical and human capital accumulation Romer (1986)
and Lucas (1988) or endogenized steady-state growth and technical progress (Romer
(1990), Grossman and Helpman (1991) and Aghion and Howitt (1992)). Those works

stayed squarely within the neoclassical tradition of explaining differences of growth rates
in terms of preferences or endowments and for a long time seem unable to provide a
fundamental explanation for economic growth. As North and Thomas (1973, p2) put it
“the factors we have listed (innovation, economies of scale, education, capital
accumulation, etc.) are not causes of growth; they are growth” (italics in original).
According to North and Thomas’s view, the fundamental explanation of comparative
growth is differences in institutions instead of factor accumulation - proximate causes of
growth.

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The first incarnations of growth theory in correlation with political institution is presented
by Max Weber (1868-1920), a 19th-century German sociologist and one of the founders
of modern sociology, in his monumental essay named Economy and Society reasoned for
the fundamental value of bureaucracy as one of the institutional foundations of capitalist
growth. In the early years of 1900, Max Weber studied the relationship between
bureaucracy, public administration and governance whose works led to his well-known
model of bureaucracy or Weber’s model for bureaucracy. Many aspects of modern public
administration date back to him. This is epitomized in the fact that a classic,
hierarchically-organized civil service is still called a “Weberian civil service”. By using
Weberian scale or Weberianness, a measurement of effectiveness and efficiency of state
apparatus, Evans and Rauch (1999) deciphered the relation between administrative
structures and changing levels of economic output and came to derivation about the role
of bureaucratic authority structures in facilitating economic growth.
As a styled fact, each regime, institution, social and political unity need a system of
procedures, formalities, administrative work papers for controlling, adjusting, operating.
The problem of whether these papers are cumbersome, bureaucratic, do they follow the
principles of transparency, simplification and facilitation result in many lines of studies
on quality of institution, its determinants and the correlation to economic performance.

Studies are wide ranging from focusing on quality of institution as source of national
income to deep determinants of quality of governance for which economic outcome is
facilitated. The common result of almost all studies is that the robust connectedness
between the efficiency and quality of regulation, a specific type of determinant of quality
of institution, which affects the economic performance of an economy is consistent.
Olson et al. (1998), Kauffman et al. (2005) came up with the same conclusion that good
governance is associated with higher economic growth. In most attempts of defining
sources of economic growth from institutional perspective quality of government is
explained by a straight forward manner and empirical terms which are neither standard
endogenous nor exogenous growth models. From organization argument political,

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economic and social outcomes depend on the large part of state bureaucratic structure.
Empirical findings prove that a strong and well-organized state bureaucracy contributed
to economic growth in some Asian countries in 1990s (Amsden 1989; Wade 1990; World
Bank 1993). In World Bank’s report in 1997 named “the state in a changing world” why
some state bureaucracies are more effective than others is analyzed focusing on
bureaucratic characteristics, inter-organizational distinctions while others were set
secondary instead. Evans and Rauch (1999) verified the effect on economic growth of
certain structural features and suggested that building a better bureaucracies and a
relevant attempt by both policymakers and social scientists to research on variations in
how state bureaucracies are organized are in need.
Institution and political regime is certain an incontrovertible subject generating
considerable interest among scholars, researchers and practitioners in recent years (World
Bank, 2004). They attempt to explain differentiation, prosperity from country to country
to find the nexus growth between collective actions or institutions and economic
activities organized within a society which help to build a monolithic model for
implementing globally. Notably Acemoglu and Robinson (2008) in their working paper

namely “The role of institutions in growth and development” raised questions of whether
institutions are key determinants of economic outcomes or secondary arrangements that
respond to others, perhaps geographic or cultural, determinants of human and economic
interactions. It is worth noting an important proposition: ultimately, the aim of
researching on institutions is to pinpoint specific institutional characteristics that are
responsible for economic well-being in any nation-context, for example, the effect of
legal institutions on the types of business contracts.
Clearly, analyzing determinants of growth from social, political and organizational
viewpoint rely on answering the question of what institutions are and its determinants.
Douglass North (1990, p 3) offers the following definition: “Institutions are the
rules of the game in a society or, more formally, are the humanly devised
constraints that shape human interaction.” From this interpretation bureaucracy, state

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apparatus and public administration, governance, regulations, rule of laws are well
defined as a key element as well as determinants of a good institution and there are many
approaches on explaining national growth rates.
Complexity and diversity of studying on the nexus between growth and its determinants
can be classified according to social and natural nature of determinants itself. From this
stance two branches of analyzing economic growth are regarded when debating entries of
theoretical model: de facto and De jure components.

1.2 Research gaps
Although there is a broad set of literature analyzing proximate and fundamental causes of
growth that will be discussed in detail in section 1.3 mentioned below, a few theoretical
and empirical research taking public administration reform as analytic background are
found in mechanism of growth or studying fundamental causes of growth. Clearly,
growth accounting cannot fully explain how and why GDP at high or low level exist if

De jure political power is not accounted for.
In institutions-augmented Solow model of growth institutional variables directly reflect
the quality of institutions they stand for . Even in De jure power and economic growth
analysis almost focus on governance indicators and give out recommendations on further
reforming institutional quality to raise economic outcomes. Analyses specialized in deep
determinants of institutional quality from perspective of PA and PAR have yet to be
many. In Viet Nam PAR-MP is supposed to be a comprehensive and inter-sector
documents guiding the process of simplification administration and modernizing public
administration, a further step of enhancing government effectiveness and quality of
governance is lack of an indicator system to assess the impact of PAR on PA system and
so quality of institution as well on national economic growth or even provincial level.
This system will make clear backlogs of PA system from administrative burdens itself
and organizational perspective so that a profound impact evaluation of bureaucracy on

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macroeconomic indicators (fiscal, public expenditure to GDP ratio..) and fining-tune state
apparatus toward building new public administration with service oriented is in need.
So far, productivity potential have seized qualitatively and quantitatively using composite
indexes, or additional insights that can be obtained regarding growth rate. Criteria and
determinants of an indicator of institution such as hierarchical and bureaucratic or public
formalities and its causality are not used for examining systematically.
Even with this respect, as the emerging of new public administration (NPA), the role of
legitimacy procedures in economic has not been focused enough. Mostly used are
education, physical capital, and health (Afonso and St.

Aubyn (2006a, 2006b),

governance indicators (Kaufmann, Kray and Mastruzzi ,2006) or ICRG (International

Country Risk Guide) (Olson, Sarna and Swamy, 2000).

1.3 Specification of research problem
De facto and De jure components of growth process
Central to studying of this paper on institutions is that whether economic institutions, and
institutions more broadly, are endogenously or exogenously impact to growth from De
facto and De jure aspect and then enlarge the research to apply for Vietnamese context.
Institutions as defined by Doglas North (1990) are, at least in part, determined by society,
or a segment of it. Consequently, the question of why some societies are much poorer
than others is closely related to the question of why some societies have much "worse
economic institutions" than others. Many scholars including John Locke, Adam Smith,
John Stuart Mill, Arthur Lewis, Douglass North and Robert Thomas, and recently many
papers in the literature on economic growth and development have emphasized the
importance of economic institutions. A useful framework for thinking about how
economic institutions are determined and why they vary across countries are still in need
of a specific theory. In other words, while we have good reason to believe that economic
institutions matter for economic growth, we lack the crucial comparative static results
which will allow us to explain why equilibrium economic institutions differ (and perhaps

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this is part of the reason why much of the economics literature has focused on the
proximate causes of economic growth, largely neglecting fundamental institutional
causes).
In this perspective, factors to regulate a good institutions and economic institutions
specifically will be clarified with focus on endogeneity of institution. Broadly, political
economy of institution will be clear cut and explaining growth will stay on political
factors. Two components of political power, which referred to as De jure (institutional)
and de facto political power are the core of the argument.

-

De jure political power: refers to power that originates from the political
institutions in society. Political institutions determine the constraints on and the
incentives of the key actors in the political sphere. This implies that:
Political institutionst

-

De jure political powert

De facto political power: the ability of a social group/classes to impose their
wish on the society if they are not allocated political power. This results in two
sources of political power: first, depend on the ability of the group in question
to solve its collective action problem then de facto political power will be
defined in comparison with economic resources which determine both the
ability of that group to use (or misuse) existing political institutions and also
their capability of having outsources or even force against different groups.
Since there is a lacuna in theoretical framework of when groups are able to
solve their collective action problems and discussing in depth about
organizational science is not the purpose of this chapter the second source of
de facto political power, hence:
distribution of resourcest

de facto political power.

With these pieces, a schematic picture of institutional research on economic
performance is as follow:

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Political

De jure

Economic

institutionst

political powert
&

Economic
institutionst

performancet
&
distribution of
resourcest+1

Distribution

De facto

of resourcest

political powert

Political

institutions t+1

Two terminologies “de facto” and “De jure”, as discussed, will lead this economic
analysis of growth to be focused on “De jure” aspect since political institutions will
indirectly affect the economic performance by regulating relevant economic institutions.
Specifically, De jure element in this case will be governance, institutional quality,
bureaucracy dimension. Apart from recent analyses which focus on de facto such as
human capital, capital accumulation, education, investment and so on, De jure factors in
this case will be public administration and state apparatus, a perennial subject of
reforming. The determinants of growth, however chosen to be variables will be public
administration and its formalities reforming and others control variables.

1.4 Research objective and research questions
As categorized by Acemoglu and Robinson (2008) Solow model can be augmented to
account for De factor and De jure and the research gaps discussed in context of Viet Nam
and to the best of writer’s knowledge on public administration science, the following
questions are the main focus of this study:
- Whether public administration is an appropriation proxy of institutional quality
to be used for elucidating economic growth?

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- How has Viet Nam’s public administration system contributed to economic
growth?
- What are measures for enhancing Vietnam’ public sector contribution towards
improving Viet Nam’ economic growth rate?
The purposes of this research are:
- Using public administration indicators as a proxy of institutional quality to find
rate of affecting provincial comparative economic growth.

- Categorize determinants of economic growth from aspects of De jure and De
facto and from which to find specific influence as follow
- Access administrative burden, a signal of effective public administration
program which affect economic outcome of a province.

1.5 Scope of study
In context of Viet Nam, public administration program has been applied since the year of
1996 until now. From that time state apparatus and rearrangement of social-economic
activities were followed strategies of reform across 63 province and regions.
Mathematically, variables which are grouped into De facto and De jure can be collected
perfectedly with exception for some variables of De jure. With implicit viewpoint that
even with or without exception of variables discussed, the process of reforming public
administration toward good institutional quality is still executed and as Acemoglu and
Robinson. (2008) discussed, de jure element is an signal to review sectors which
contribute to a good institutional quality. This view is consistent with Solow model
augmented for institutional elements.
For this reason, the scope of this study spread on 63 province and regions in the
period of 1996 to 2016.

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1.6 Structure of the study
The study is divided into five chapters. Chapter 1 address problem and links to Viet Nam
case and analyze aspects of institutional quality so that public administration reform will
be entry of mathematical modelling. The next chapter make an overall view on theories
related and empirical research, empiric studied as well as methodologies applied. Chapter
third will present analytical framework and econometric models to make regression
analysis in case of Viet Nam. In this chapter data collection methods and describing
variables will be included. Chapter 4 will present results of regressions using suitable

econometric models and comparison with interpretations of statistics with respect to
theoretical framework and empirical analysis in case of Viet Nam. Practically applying
the results of analysis and some suitable implications, recommendations for policy
research will be written in chapter 5. This chapter also end up the problem studying as
conclusion and the last chapter as well.

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CHAPTER 2 LITERATURE REVIEW
The literatures related to institutional quality and economic growth will be analyzed in
advance in relation to previous researches to find empiric results. In context of Viet Nam,
linking PAR factors with economic performance is verified and the channels of which the
quality of institution affect economic turnover are proved to be public administration
process. With this demonstration, suitable growth model is approached to count for PAR
elements as proximate variables.

2. Literature review
2.1 Review of theory
2.1.1 Review research on institutional quality and economic growth
Karl Marx (1848) when studying philosophy grouped nomenclatures institution, public
administration, governance, bureaucracy dimension into historical materialism as a strand
of social sciences. Studying this school of terminologies have no economic characteristics.
By using dialectic studying method, the nature of those concepts are classified as De jure
elements as analyzed by Acemoglu and Robinson (2008) and modeled as determinants of
economic outcome. By this way the relationship between pure social scientific
nomenclatures and economic ones is established to make quantitatively dissecting.
According to De jure and De facto theme of study of Acemoglu and Robinson, it is clear
that almost all precedent analysis used de factor elements as determinants of economic
growth in their growth functions while few studies used De jure elements and its

component index to find causal factors of growth in econometric models. Academically,
it is supposed to acknowledge that while De facto phrase is mentioned as natural factors
relating material and tangible resources, De jure element is quite an abstract phrase since
its nature relating to manner of organizing, operating, managing social relations, rule of
law and so on. It means that specific type of De facto elements such as physical capital,
factor endowment, geography, land, colonial history have been used in most empiric

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researches as determinations of growth in growth functions. Less components of De jure
elements are used in empirical works. Even in the branch of De jure oriented analyses,
deep studying on components of institution such as PAR, PA, bureaucracy and their
impact on the total production of the economy is quite a few.
The purpose of this chapter is to explore an interrelation between deep determinants of
institutional quality, PA system and PAR or De jure political power in this case, and
economic growth. This result in further making analytical explanation on De jure
political power to find channels through which economic performance is adjusted to
approach purpose of growth quantitatively and economic institution is not the initial
target of this study. Analytical method of study of this writing when using De jure
element will take institutional quality as major indicator and PAR and its attributions to
indicate institutional quality.
As noted by K.Marx and as compared in empiric result of Acemoglu and Robinson, it is
clearly seen that De jure element is of context specific since this is nature of society and
is categorized as historic materialism. All components of De jure such as public
governance, institutional quality, public administration would be context specific as well
and therefore different from nation to nation and even different inside a nation at different
period of time. In this paper a specific definition of public governance which makes it
particularly clear to explore how different ruling powers or governors can be involved
appropriately issuing, improving, upholding, strengthening a public system (Governance

International, 2003) is used. For further analysis, some abstractive concepts above are
displayed as follow:
Public governance is an apparatus with functions of social management. With this regime
all social classes mutually interact in order to influence the outcomes of public policies
and good governance means that social expectation and economic interests of each social
classes in an issue or area are reached relying on negotiations and agreed governance
principles as researched by Bovaird and Elke Löffler (2003). Specific-context, as
mentioned, is a rule of any analysis and by this meaning, public governance is abroad and

21


common concept and public administration is conveyed. Public administration is a term
in detail which mean that rule of law on relation between state, public employment and
people in a specific area.
The function of government and its efficiency can be accessed using De jure elements
such as public wage-bills, public employment rate, public expenditure as component of
consumption, participation of society in political process. These are indicators of
institutional quality. Practically, institutional quality affect economic activities through
adjusting those indicators as an action of ruling social and improving quality of public
governance toward social agreements. Specifically, economic growth as a result of social
participation in commercial and productive activities given the safety and security of
investment and the property or ownership right. Empirical tests for this correlation can be
listed by Helliwell (1992); Minier (1998), Agenor and Montiel (1999); Obreja
Braşoveanu (2007); Alesina and Perotti (1997); McDermott and Wescott (1996); SeguraUbiergo, Simone and Gupta (2006); Roubini and Sachs (1989); Beldacci et al. (2004);
Mulas-Granados (2005). Those works, however, examined for the effect of rate of
investment, land owner, expropriation risk, corruption which are De facto elements as
discussed instead of using deep determinant of institutional quality such as bureaucratic
indicators, structural reform, modernizing and simplification administration burdens.
Notably, Ding and Knight (2010) when analyzing China’s mysterious economic growth

stressed the role of structural change by using Solow model of growth to analyze factors
contribute to growth as an experiment of explaining economic growth from institutional
aspects. In detailed, these determinants used in growth equation are trade openness,
education, human resources, secondary education enrolment, factor endowment such as
colonial characteristics and railway density, and other relevant. Additionally, in their
work factors of endowments were included in model such as geography advantages,
resources available. These variable were categorized to group of de factor according to
theory of Acemoglu and Robinson. (2008).

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2.1.2 Review research on public administration reform and national
income
Evans and Rauch (1999) used public size elements in their analysis to find the effect of
how efficiency an institution can foster or impede the process of growth and came to
conclude that these elements could help to raise factors in explaining the situation of a
nation. Even though using public size as entry of modelling variables, analyzing based
upon cross nation indicators and using system of unique indicators such as Weberianness
scale, ICRG, BRI is not context specific since institutional attributes are different from
nation to nation.
Another strand of studying De jure element on economic growth as an example. In this
school of research, the effect of bureaucracy on growth is quantitatively analyzed by
Dahlström et al.(2010). In their study, Dahlström et al used Webrian indicators to access
to attributes of bureau structure a state possess: the first is administration directly depend
on current government and management activities as well. For this reason the similarity
in administrative operations is found both at public sector and private one. More
specifically, three groups of researches included CPB Netherlands Bureau for Economic
Policy Analysis (2004), Gelauff and Lejour (2006), the Swedish Agency for Growth
Policy Analysis (2010) and the Australian Government Productivity Commission (2006);

Klapper, Laeven and Rajan (2006), Djankov, La Porta, Lopez-De Silanes and Shleifer
(2002) and Ciccone and Papaioannou (2007); Costa and Aubyn (2012) concluded that
regulatory burdens negatively affect or diminish the entry of new firms into market when
examining the role of administrative burdens, administrative formalities on business and
total income of commercial activities. In those works broad proposition of reducing
administrative burden to foster economic activities is assumed as context specific
characteristics. By this manner, costs and delays in starting up new business, effects of
“red tape” on entrepreneurship, possible effects of legal-simplification programs will be
remarkably affected, more transparent business environment is created.

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Public size is also an important side that need to be verified in context of Viet Nam. In
this trend, financial aspect of public size included national savings reducing budget
deficits, increasing productive investments in infrastructure and social services to
contribute to growth in general was main purpose of examination performend by
Albertini and Bertucci (2006). The scope of study, however, is international level with
data collected cross-nation and belong to De facto cause of growth as discussed by
Acemoglu and Robinson. (2008).

2.1.3 Concept of public administration and the nature
The long history of public administration can be divided into six phases in which the first
stage of origination was Woodrow Wilson (1856 - 1924) as the primitive period of
studying. The second stage was from 1900 to 1926 with theoretical model of separation
of politic and administrative, administrative principles was compiled at the third phase
(1927 - 1937), from 1950 to 1970 public administration was considered as politic science
at the fourth period then proceeded to management science at the fifth step, from that
time until now public administration has been considering as administrative science.
Whatever scenarios public administration tends to be the way of performing state power

so that it essential associate to national apparatus. The way of organizing mechanism of
state or institution then need a system of prolix procedures/formalities for
operating/managing. This dissertation has no throughout concentration on public
administration and its relation to politic and institution of a regime, the major purpose is
to analyzing how good public administration contribute to economic performance and
growth instead. In this respect, a proposition of public administration in political science
is acknowledged so that analysis in depth on causal link between efficiency of good
regulation, well organized system of administrative principles and so quality of institution
can be further proceeded. For any country, especially those developing and transitioning
appropriate framework is not an economy on the technological frontier but one well
inside it.

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Public administration (PA) science studies the machinery and its features, characteristics
such as policies, systems, structures, personnel) and the management of government,
particularly focal attention is the ‘executive’ branch of government including the political
leadership and government departments or agencies with staff on the state payroll (Earle
and Scott, 2010)

2.1.4 Public administration reform and its nature
Public administration reform (PAR) is broadly about strengthening the way that the
public sector is managed. The United Nations Development Programme (UNDP) refers
to public administration reform as works to fine-tune “aggregate machinery (policies,
rules, procedures, systems, organizational structures, personnel, etc.) funded by the state
budget and in charge of the management and direction of the affairs of the executive
government, and its interaction with other stakeholders in the state, society and external
environment (UNDP, 2004). PAR or PSR from this approach relate to collective actions
and the results of applying policies will be time consuming. PAR is so one of the most

important horizontal reform areas in each country since this is of De jure element from
which causal link between institution and the economy will be defined.
In Vietnam, the initiation of PAR/PSR was embarked since the Eight plenum of the
Central Committee of the Vietnamese Communist Party (VII Congress) in January 1995
when the rubric of the PAR first endorsed. From this time onwards PAR framework is
regarded as public administration reform-master program (PAR-MP) and for each tenure
or period of time this PAR-MP will be re-evaluated and validated.
Four decisive areas of reforming are institutional reform; organizational reform;
improvement of the contingent of cadres and civil servants; and public finance reform.
The PAR when under taken will stick to specific objectives, however, the tough emphasis
is simplification of the administrative apparatus, professionalization, accountability,
transparency, coordination, reduction of compartmentalization in the preparation of legal
documents in general and in policy implementation in particular, and reduction of

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