This paper identifies negative impacts of budget expenditure decentralization on Vietnam’s economic growth and positive impacts of central government expenditure, private investments and trade openness on the economic growth as well. Additionally, no relationship between inflation rate along with changes in labor force and economic growth is found. | JED 2012 |41 Perfecting Fiscal Decentralization to Increase Economic Growth in Vietnam SỬ ĐÌNH THÀNH Associate Professor, Doctor of Philosophy, University of Economics - HCMC Email: dinhthanh@ MAI ĐÌNH LÂM Master of Arts, Ho Chi Minh National Academy of Politics and Public Administration Email: maidinhlam2006@ ABSTRACT The government intervention in the economy is practical and widely acknowledged. The central government expenditure, like budget incomes, is to regulate the national economy. According to Keynes (1936), the government should aim at demand-side stimuli to facilitate consumption and production. This paper identifies negative impacts of budget expenditure decentralization on Vietnam’s economic growth; and positive impacts of central government expenditure, private investments and trade openness on the economic growth as well. Additionally, no relationship between inflation rate along with changes in labor force and economic growth is found. Keywords: economic growth, budget expenditure, private investment, trade openness, labor force, inflation. 42 | Sử Đình Thành & Mai Đình Lâm Perfecting Fiscal Decentralization 1. INTRODUCTION In order to promote economic growth, budget expenditures by authorities of any levels must be thoroughly weighed up. Fiscal decentralization and empowerment of lower authorities are part of public section reform that aims at enhancing competitiveness of lower authorities in provision of public services and getting out of the clumsiness of the economy (Bahl & Linn, 1992; Bird, Ebel & Wallich, 1993). In the world there have been plenty of researches on impacts of budget expenditure decentralization on economic growth. In Vietnam, some examples are those by Hoàng Thị Chinh Thon et al. (2010) and Phạm Thế Anh (2008). Yet, their papers just dealt with a specific locality but not the whole national economy. Hence, the present paper is to investigate such impact on Vietnam’s national economy as a
