Environmental Regulation and Labour Demand among Vietnamese SMEs

The effects of environmental regulation on labour demand has received significant attention, though research has almost entirely been conducted in developed countries. The aggressive development strategy pursued by Vietnam, through reforms such as the Doi Moi, has been associated with poor environmental performance. Since 1994, Vietnam has pursued detailed Environmental Plans aimed at reducing emissions and pollution by firms and has introduced numerous laws which have implications for all Vietnamese businesses. This dissertation examines changes in employment resulting from treatment of environmental factors as mandated by regulation among micro, small, and medium manufacturing enterprises in Vietnam, using unbalanced firm-level panel data from the 2011, 2013, and 2015 rounds of the UNU-Wider Vietnam SME survey. Ordinary Least Squares (OLS), two-stage-least squares (2SLS), fixed-effects, and fixed-effects-2SLS models are estimated to recover effects of treatment of environmental factors on labour demand. OLS and fixed-effect models show small positive effects. Once instrumental variables and fixed effects are used to control for endogeneity, results still indicate that there are no large negative effects on employment from treatment of environmental factors. These results are consistent with existing evidence from developed countries that environmental regulation does not lead to large reductions in employment by regulated firms.