Composite index assessing the level of economic development at the provincial level in Vietnam

Abstract

At the provincial and city levels in Vietnam, many individual statistical indicators reflect the socioeconomic situation, making it difficult to capture and synthesize general information. The economic development of a province is often understood as the growth of the Gross Regional Domestic Product (GRDP). Still, it needs to demonstrate the multidimensionality of the concept of economic development. Therefore, building a comprehensive index to measure the level of economic development at the provincial level is very necessary, contributing to supplementing statistical tools to evaluate the economic development of the province in Vietnam. The composite index is formed from 19 indicators of 5 components: Demographic characteristics, labor-employment, resources, competitiveness, and quality of life. Data source is collected mainly from data from the Statistics for the period 2016-2020. Data are standardized by Z-score with weights estimated by the Principal Component Analysis (PCA) and composite index calculated from the weighted average of 5 main components with weight being the explained variance of the components. The results of the composite index show that Ho Chi Minh City and Hanoi are the economic centers of the country with the highest level of development. In contrast, the Northern midlands and mountain areas provinces have the lowest level of development. In addition, the study shows that a clear difference in the level of economic growth between the six regions in Vietnam. Besides, there is statistical evidence of spatial correlation between provinces in Vietnam, so the spatial Durbin model is used to replace the panel data OLS model. Spatial regression analysis shows that the proportion of population, businesses, and HDI have an impact on the level of economic development of the host locality, in addition, the proportion of the population also has a positive effect on the level of development economic development of neighboring localities.