Regional Redistribution and Stabilization in Vietnam: The Role of Intergovernmental Fiscal Transfer

The aim of this paper is to investigate the redistribution and stabilization effects of intergovernmental fiscal transfer in Vietnam. We found that the redistribution effect of fiscal transfer was statistically significant and stable overtime, ranging 10.1% to 12.7%. These results are relatively low compared to developed countries such as US, UK and Italia, but consistent with evidence found in developing countries e.g. Taiwan and Argentina. The underlying reasons are due to vertical intergovernmental transfer mechanisms, which are believed to be less transparent and low accountability of government agencies and the country's limited resource constraint. The stabilization effect, in contrast, showed better result; with total fiscal transfer stabilize 23.7% to 28.3% of change in provincial per capital income. The targeted transfer is shown to play important role in sustainable development, especially in a favorable economic condition.