The Role of Investment Sources in Regional Income Convergence in Vietnam: Evidence from Provincial Data, 2007-2024

Abstract

This study examines the role of different investment sources in promoting regional income convergence in Vietnam using provincial data from 63 provinces and cities over the period 2007-2024. Grounded in the neoclassical growth theory of Solow, the study tests both sigma and beta convergence to determine whether poorer provinces tend to catch up with richer ones in terms of per capita income. The empirical analysis focuses on three key investment sources: public investment, domestic private investment, and foreign direct investment. The results provide evidence of income convergence across Vietnamese provinces, with estimated convergence speeds ranging from 1.2% to 5.6%. Among the three investment sources, foreign direct investment shows the strongest contribution to regional convergence, followed by public investment and domestic private investment. Public investment plays an important developmental role by supporting infrastructure provision and reducing regional disparities, particularly in disadvantaged areas. However, the uneven spatial distribution of foreign direct investment and differences in local development conditions may weaken the stability of the convergence process. Based on these findings, the study suggests that Vietnam should improve the efficiency of public investment, attract foreign direct investment more selectively toward disadvantaged regions, and encourage domestic private investment in supporting industries. These policy directions can strengthen investment spillovers, reduce income disparities, and promote more balanced and sustainable regional development in Vietnam.