The impacts of civil society and inequality on the extractive capacity of authoritarian regimes: a conceptual model and the case study of Vietnam

Abstract

This paper analyses the impacts of civil society and inequality on the extractive capacity of authoritarian regimes and undertakes a case study of Vietnam. The paper argues that civic groups tend to reduce the extractive capacity of such states, defined as the sum of taxation and rent extraction. This induces the government to substitute rent-extraction for taxation. This hypothesis is tested using fixed-effects regression techniques with panel data of 63 provinces for 2009–2014. Our estimates imply that increases in non-profit institutions reduce the regime’s extraction in terms of both budget revenue and informal charges paid by registered firms. Other results are also consistent with our conceptual model. Provinces with larger income gaps exhibit lower extraction, proxied by government expenditures.

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Fig. 1

Source: Authors’ design based on Congleton and Lee (2009)

Fig. 2

Source: Authors’ design

Notes

  1. 1.

    World Bank’s classification as of 2018 fiscal year, see: https://datahelpdesk.worldbank.org/knowledgebase/.

  2. 2.

    See Vietnamese Ministry of Finance (2017) for the detailed proposal.

  3. 3.

    Figures of Vietnamese government’ tax revenue are collected in World Development Indicators, available at World Bank’s website: https://data.worldbank.org.

  4. 4.

    World Bank’s data show that Vietnam still sets high barriers for doing business when ranking 70th out of 190 assessed economies in terms of ease of doing business in the latest ranking 2020. See more at: https://www.doingbusiness.org/. Higher barriers are made in staring a business (#115), paying formal tax (#109); and resolving insolvency (#122). These give more room for the state and state’s officials to get rent extraction.

  5. 5.

    Vietnam ranked 117th out of 180 countries and territories in 2018 in CPI; during 2015-2018, Vietnamese government remained relatively high corrupt with the low scores of CPI, around 31-35/100 points.

  6. 6.

    Olson (1965) proposes that group sizes, values that each member can receive, and free-rider elements are key determinants for the success of collective action. When the economy grows, middle and high-income citizens in high-performing autocracies have incentives to carry out more non-profit activities to further their interests. However, the outcomes depend on the efficiency of their collective action and the government’s choices.

  7. 7.

    See Congleton and Lee (2009) for the conditions and corner solutions.

  8. 8.

    Data are collected from PCI’s website: http://eng.pcivietnam.org/.

  9. 9.

    Our suggestion should be careful when some forms of informal charges in Vietnam are taxation and official rent extraction, see Fig. 2.

  10. 10.

    Taking a revolutionary approach, Giovanni et al. (2015) show certain groups such as workers and the middle class can put pressure on the ruler to increase the powers of the parliament and redistribution to keep these groups content, or “encompassed” in non-revolutionary terms.

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Acknowledgements

We would like to thank the Co-Editors and the reviewer(s) at Constitutional Political Economy for their thoughtful and detailed comments on our paper. We also would like to thank Nguyen Hong Ngoc (School of Economics, University of Queensland) for helping us proofread earlier versions of our manuscript. Particularly, we would like to express our gratitude to Professor Roger Congleton (Department of Economics, West Virginia University) for his arduous support. The views expressed in this article are the authors’ personal findings and do not necessarily reflect the policies and positions of Oxfam.

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Nguyen, T.Q., Nguyen, G.K. The impacts of civil society and inequality on the extractive capacity of authoritarian regimes: a conceptual model and the case study of Vietnam. Const Polit Econ (2020). https://doi.org/10.1007/s10602-020-09311-9

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Keywords

  • Extractive capacity
  • Rent extraction
  • Leviathan model
  • Civil society
  • Inequality
  • High-performing autocracy
  • Vietnam

JEL Classification

  • C79
  • H39
  • P45