This paper examines the relationship between governance quality, corruption, and informality using subnational panel data from Vietnam. By combining the Provincial Competitiveness Index (PCI), which captures firm-level experiences, and the Provincial Governance and Public Administration Performance Index (PAPI), which reflects citizen-level perceptions, the study provides a dual-perspective assessment of local institutions. The results reveal a striking asymmetry. Improvements in firm-oriented governance are associated with lower levels of informality, while higher citizen-perceived governance quality is linked to increased reported informal payments. These findings suggest that governance reforms may have reduced regulatory frictions for firms but have not eliminated informal practices in public service delivery. The role of corruption appears weaker once governance is accounted for, indicating that it is embedded within broader institutional conditions. The results are robust across alternative measures of informality and model specifications. This paper contributes to the literature by highlighting the multidimensional nature of governance and the importance of distinguishing between firm and citizen experiences. The findings underscore the need for more targeted reforms to address informal payments in citizen–state interactions.
This paper examines the relationship between governance quality, corruption, and informality using subnational panel data from Vietnam. By combining the Provincial Competitiveness Index (PCI), which captures firm-level experiences, and the Provincial Governance and Public Administration Performance Index (PAPI), which reflects citizen-level perceptions, the study provides a dual-perspective assessment of local institutions. The results reveal a striking asymmetry. Improvements in firm-oriented governance are associated with lower levels of informality, while higher citizen-perceived governance quality is linked to increased reported informal payments. These findings suggest that governance reforms may have reduced regulatory frictions for firms but have not eliminated informal practices in public service delivery. The role of corruption appears weaker once governance is accounted for, indicating that it is embedded within broader institutional conditions. The results are robust across alternative measures of informality and model specifications. This paper contributes to the literature by highlighting the multidimensional nature of governance and the importance of distinguishing between firm and citizen experiences. The findings underscore the need for more targeted reforms to address informal payments in citizen–state interactions.
