This study provides a comprehensive ex-ante evaluation of Vietnam’s provincial mergers on total factor productivity (TFP). The study employs a novel, multi-stage econometric framework tailored to the Vietnamese case, deploying a methodologically advanced and internationally recognized index framework. The methodology employs (i) Färe-Primont index decomposition for panel TFP measurement, (ii) spatial panel data models capturing both contemporaneous and lagged spillover effects, and (iii) counterfactual simulation using pre- and post-merger contiguity matrices. The empirical framework employed in this study withstood extensive validation, including variance inflation factor (VIF) diagnostics, Moran’s I test, and placebo analyses, all of which confirmed the robustness of the results. Counterfactual simulations forecast that consolidation will amplify human-capital spillovers—raising neighboring training-rate externalities and induce a strong endogenous spatial feedback loop, suggesting that merged provinces could realize substantial scale economies and integrated market benefits. However, increased spatial dependence also prompts faster shock transmission, underscoring the need for coordinated infrastructure and governance reforms. Our analysis highlights both the promise and risks of administrative reform, offering policymakers quantitative guidance on optimizing provincial boundaries to foster sustainable productivity growth. It lays the groundwork for an ex-post Spatial difference-in-difference (DiD) evaluation of provincial mergers, thereby advancing both methodological practice and policy-relevant insights into the governance and diffusion of productivity in developing economies.