Econ Transit Institut Change. 2019;1–30. | 1 wileyonlinelibrary.com/journal/ecot Received: 4 November 2017 | Accepted: 23 October 2018 DOI: 10.1111/ecot.12210 ORIGINAL ARTICLE Institutions for private sector development and pro- poor growth: Evidence from Vietnam Trung X. Hoang 1,2 | Cong S. Pham 3 | Mehmet A. Ulubaşoğlu 3 © 2019 The Authors. Economics of Transition and Institutional Change © 2019 The European Bank for Reconstruction and Development. 1 Department for Management of Science and Technology Development, Ton Duc Thang University, Ho Chi Minh City, Vietnam 2 Faculty of Business Administration, Ton Duc Thang University, Ho Chi Minh City, Vietnam 3 Deakin University, Melbourne, Australia Correspondence Trung X. Hoang, Ton Duc Thang University, Ho Chi Minh City, Vietnam. Email: hoangxuantrung@tdtu.edu.vn Abstract Using the Vietnam Household Living Standards Survey 2008, we explore the differences in pro-poor growth per- formance in provinces in Vietnam according to the quality of the provinces’ institutions that support private sector activity. We exploit the localized and varying effect of French colonial legacy across Vietnamese provinces to address the endogeneity of institutions. We find strong and robust evidence of a positive effect of good-quality institutions that support private sector activity on pro-poor growth and that enhanced working hours and hourly wage and extended income from non-farm self-employment play critical roles in this outcome. KEYWORDS French colonial legacy, private sector development, pro-poor growth, Vietnam 1 | INTRODUCTION The number of people in the world living on less than US$ 2 per day has decreased over the past three decades. Using household survey data from 117 countries, Ravallion (2010) shows that about 1.2 bil- lion people in the world joined the middle-class between 1990 and 2005, with about half of them located in China and 117 million located in India. However, the bad news is that many of the ex-poor are still positioned just above the poverty line and are still vulnerable to economic slowdowns. The extent to which economic growth has helped the poor, as well as the sustainability of this progress, has been the subject of extensive debate in the literature (e.g. Dollar & Kraay, 2002; Gasparini, Gutiérrez, & Tornarolli, 2007; Ravallion & Chen, 2003; Son, 2004).