CONDITIONAL CONVERGENCE OF GDP PER CAPITA ACROSS VIETNAMESE PROVINCES: A SYSTEM GMM APPROACH

Achieving long-term and sustainable economic development in developing countries requires overcoming the middle-income trap. This challenge is particularly important for transition economies seeking to promote balanced development across regions. This study applies the System Generalized Method of Moments (SYS-GMM) estimator to examine income convergence across Vietnam’s 63 provinces and centrally governed cities. The empirical results provide no statistically significant evidence of absolute convergence among the examined localities. However, strong evidence of conditional convergence is identified. The estimated annual rate of conditional convergence is 3.08%, indicating that approximately 22.53 years would be required for provinces and cities to reduce by half the gap between their current income levels and their respective steady-state equilibria. The findings further suggest that accelerating economic growth requires substantial progress in industrial development. Nevertheless, such development should be aligned with Vietnam’s long-term Net Zero commitments and accompanied by effective population policies, as higher population growth is found to have a negative effect on per capita economic growth.