INVESTMENT AND INCOME CONVERGENCE: AN EMPIRICAL STUDY IN VIETNAM

Abstract This study analyzes the impact of investment types on income convergence between regions in Vietnam in the period 2007-2024, using data from 63 provinces provided by the General Statistics Office. Based on Solow (1956) neoclassical growth theory, the article tests the income convergence hypothesis, focusing on the roles of public investment, domestic private investment and foreign direct investment. The results show that provinces in Vietnam tend to converge in per capita income, with the gap between rich and poor gradually narrowing, consistent with Solow theory, achieving a convergence rate of 1.2% to 5.6%. In particular, foreign direct investment has the most positive impact on convergence, followed by public investment and private investment. Public investment is identified as an important factor in reducing regional inequality, playing the role of a "development tool". However, the uneven distribution of foreign direct investment and objective factors make the convergence process unstable. The study recommends that the Government should increase the efficiency of public investment in infrastructure in disadvantaged areas, selectively attract foreign direct investment in remote provinces, and encourage private investment in supporting industries through tax and loan incentives. These policies will create a spillover effect, promote sustainable economic development and reduce income disparities between regions in Vietnam. JEL Classigcation Code: O47; E22; R11; F21; O53.