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Long-run costs of piecemeal reform: Wage inequality and returns to education in Vietnam

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  • Phan, Diep
  • Coxhead, Ian

Abstract

In this paper, we examine changes in wage structure and wage premia during Vietnam’s transition from command to market economy. Relative to other work in this literature, our paper is unique in that we identify the policies that lead to such changes. By examining skill premium trends along the two dimensions of particular importance to the transition—state or non-state firms, and traded or non-traded industries—we are able to separate the contribution of external liberalization to wage growth and rising skill premia from that of domestic labor market reforms, and to examine potential interactions between the two types of reform. The results point to the high cost of incomplete reform in Vietnam. Capital market segmentation creates a two-track market for skills, in which state sector workers earn high salaries while non-state workers face lower demand and lower compensation. Growth is reduced directly by diminished allocative efficiency and reduced incentives to acquire education, and indirectly by higher wage inequality and rents for workers with access to state jobs.

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  • Phan, Diep & Coxhead, Ian, 2013. "Long-run costs of piecemeal reform: Wage inequality and returns to education in Vietnam," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1106-1122.
    • Handle: RePEc:eee:jcecon:v:41:y:2013:i:4:p:1106-1122
    DOI: 10.1016/j.jce.2013.04.001
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    Cited by:

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    5. Schmillen,Achim Daniel & Packard,Truman G., 2016. "Vietnam's labor market institutions, regulations, and interventions : helping people grasp work opportunities in a risky world," Policy Research Working Paper Series 7587, The World Bank.
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    9. Huynh, Pham Duy Anh, 2023. "Non-market economy status in anti-dumping investigations and proceedings: A case study of Vietnam," OSF Preprints esw4b, Center for Open Science.
    10. McGuinness, Seamus & Kelly, Elish & Pham Thi Thu, Phuong & Ha Thi Thu, Thuy, 2015. "Returns to Education and the Demand for Labour in Vietnam," Papers WP506, Economic and Social Research Institute (ESRI).
    11. Huynh, Pham Duy Anh, 2022. "Non-Market Economy Status In Anti-Dumping Investigations And Proceedings: A Case Study Of Vietnam," OSF Preprints 2twmp, Center for Open Science.
    12. Diep Phan & Ian Coxhead, 2023. "Capital Cost, Technology Choice, and Demand for Skills in Industries in Viet Nam," Working Papers DP-2023-07, Economic Research Institute for ASEAN and East Asia (ERIA).
    13. Shaio Yan Huang & Chao-Hsiung Lee & Lee-Hsien Pan & Bich Hanh Nguyen Thi, 2016. "IPO Initial Excess Return in an Emerging Market: Evidence from Vietnam’s Stock Exchanges," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(02), pages 1-23, June.
    14. Emi Kojin & Ian Coxhead, 2020. "Introduction to the Special Issue on Pathways to Prosperity in Vietnam: Structural and Transitional Inequality in the Distribution of Opportunity," The Developing Economies, Institute of Developing Economies, vol. 58(4), pages 267-275, December.
    15. Ian Coxhead & Diep Phan, 2013. "Princelings and Paupers? State Employment and the Distribution of Human Capital Investments Among Households in Viet Nam," Asian Development Review, MIT Press, vol. 30(2), pages 26-48, September.
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    17. Hai-Anh H. Dang & Paul W. Glewwe, 2018. "Well Begun, but Aiming Higher: A Review of Vietnam’s Education Trends in the past 20 Years and Emerging Challenges," Journal of Development Studies, Taylor & Francis Journals, vol. 54(7), pages 1171-1195, July.
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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • P23 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Factor and Product Markets; Industry Studies; Population
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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