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Abstract: There has been a large divergence in economic prosperity between Northeast and Southeast Asia since the mid-20th century, and the governance organizations and norms of Asian societies plausibly help explain this divergence. This study examines the impacts of different historical governance norms on development using Vietnam as a laboratory. Northern Vietnam (Dai Viet) was ruled by a bureaucratic state inherited from China. It governed through a centralized, competitively selected bureaucracy, and the village was the fundamental administrative unit. Southern Vietnam was a peripheral tributary of the Khmer (Cambodian) Empire. It followed a patron-client model with weaker, more personalized power relations and no village intermediation. The Khmer region was not brought under Vietnam’s control until just prior to French colonization. We use a regression discontinuity design across the Dai Viet-Khmer boundary to compare villages that had a bureaucratic state to nearby areas that had a patron-client state. We find that areas historically under the bureaucratic state have higher living standards today. Using rich data from South Vietnam and the unified Socialist Republic of Vietnam, we document that in villages with a bureaucratic historical state, citizens have been better able to organize for public goods and redistribution through stronger local governments and civil society. However, today foreign companies are less likely to invest in historically bureaucratic areas, which have a long history of being relatively closed towards outsiders. Overall the study suggests that the bureaucratic state in East Asia – deeply embedded in civil society – played a central role in this region’s growth.
[Keywords: political economy, state capacity, governance, economic development]