Impact of Investment Structure by Economic Sectors and Other Factors on Economic Growth: Evidence from Vietnam with SGMM Estimation and Bayes Factor Approach

Investment and sectoral economic structure are two of the important factors affecting economic growth, especially in developing countries. However, there are few studies in Vietnam assessing the impact of investment structure by economic sectors on economic growth. Moreover, in foreign studies on this issue, most quantitative methods and models have not addressed the non-homogeneous and endogenous problems in the research model. Different from previous studies, a combination of System Generalized Method of Moments (SGMM) and Bayes Factor approach will be used to evaluate the impact of investment structure by economic sectors and other factors on GDP of Vietnam. Results of two-step SGMM estimation combined with the Minimum Bayes’s Factor approach with data sets of 51 provinces of Vietnam in the period of 2013–2017 show that the proportion of investment of industry sector (RIC_IC) as well as service sector (RIC_SV), labor productivity (LP), control index of public service delivery (Pa6) and provincial competitiveness index (PCI) have positive impacts on Vietnam’s GDP growth in the period 2013–2017. In order to promote Vietnam’s economic growth, it is necessary to continue applying policies to attract investment in industry and service sectors with special emphasis on the industry sector, encouraging the provision of public services and strengthening provincial competitiveness to boost high economic growth.