Human capital shortages in the Vietnamese industry. A firm-level analysis

The access to human capital results to be a fundamental determinant of growth in LDCs enabling conditions for economic diversification and industrial upgrading. Skilled labour shortages generate detrimental dynamics for enterprise development preventing the spillovers arising from the productive interactions with the foreign agents and obstructing the domestic firms’ capabilities to absorb knowledge and technology. At the same time, the presence of an inadequately skilled workforce is combined to a scarce degree of firms’ responsiveness with respect to learning by exporting mechanisms and exploitation of R&D incentives. In this regards, firms are not likely to face undifferentiated human capital constraints. Indeed, the typology and the severity of the obstacles in terms of inadequately educated workforce are likely to be significantly determined by their observable and unobservable attributes. We implement binary discrete choice models on firms’ subjective assessments to evaluate whether and to what extent the attributes of the firms matter in determining the degree of severity of the human capital constraints. The main results of our study, conducted on about 1000 firms in Vietnam, show that the indirect exporters, the firms investing in R&D and the firms located in urban contexts are more likely to report human capital shortages as a major constraint relative to the rest of the firms.