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Who Suffers the Penalty? A Panel Data Analysis of Earnings Gaps in Vietnam

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  • Roubaud, François
  • Nordman, Christophe Jalil
  • Nguyen, Huu Chi

Abstract

In spite of its predominant economic weight in developing countries, little is known about the informal sector earnings structure compared to that of the formal sector. Taking advantage of the rich VHLSS dataset in Vietnam, in particular its three wave panel data (2002, 2004, 2006), we assess the magnitude of various formal–informal earnings gaps while addressing heterogeneity at three different levels: the worker, the job (wage employment vs. self-employment) and the earnings distribution. We estimate fixed effects and quantile regressions to control for unobserved individual characteristics. Our results suggest that the informal sector earnings gap highly depends on the workers’ job status and on their relative position in the earnings distribution. Penalties may in some cases turn into premiums. By comparing our results with studies in other developing countries, we draw conclusions highlighting Vietnam’s labour market specificity

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Bibliographic Info

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/12321.

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Date of creation: Dec 2013
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Publication status: Published in Journal of Development Studies, 2013, Vol. 49, no. 12. pp. 1694-1710.Length: 16 pages
Handle: RePEc:dau:papers:123456789/12321

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Keywords: Informal employment; earnings gap; transition matrix; panel data; Vietnam;

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  1. repec:dau:papers:123456789/10658 is not listed on IDEAS
  2. Francis Teal & Justin Sandefur, 2010. "The Returns to Formality and Informality in Urban Africa," Economics Series Working Papers CSAE WPS/2010-03, University of Oxford, Department of Economics.
  3. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  4. Soderbom, Mans & Teal, Francis & Wambugu, Anthony, 2005. "Unobserved heterogeneity and the relation between earnings and firm size: evidence from two developing countries," Economics Letters, Elsevier, vol. 87(2), pages 153-159, May.
  5. Olivier Bargain & Prudence Kwenda, 2010. "Is Informality Bad? - Evidence from Brazil, Mexico and South Africa," Working Papers 201003, School Of Economics, University College Dublin.
  6. McKenzie, David & Seynabou Sakho, Yaye, 2010. "Does it pay firms to register for taxes? The impact of formality on firm profitability," Journal of Development Economics, Elsevier, vol. 91(1), pages 15-24, January.
  7. Jean-Pierre Cling & Mireille Razafindrakoto & François Roubaud, 2012. "Explanatory factors behind formalizing non-farm household businesses in Vietnam," Working Papers DT/2012/20, DIAL (Développement, Institutions et Mondialisation).
  8. Fernández, Rosa M. & Nordman, Christophe J., 2009. "Are there pecuniary compensations for working conditions?," Labour Economics, Elsevier, vol. 16(2), pages 194-207, April.
  9. Jean-Pierre Cling & Mohamed Ali Marouani & Mireille Razafindrakoto & Anne-Sophie Robilliard & Francois Roubaud, 2009. "The Distributive Impact of Vietnam's Accession to the WTO," Economie Internationale, CEPII research center, issue 118, pages 43-71.
  10. Rand, John & Torm, Nina, 2012. "The Benefits of Formalization: Evidence from Vietnamese Manufacturing SMEs," World Development, Elsevier, vol. 40(5), pages 983-998.
  11. Cling, Jean-Pierre & Razafindrakoto, Mireille & Roubaud, François, 2011. "Assessing the Potential Impact of the Global Crisis on the Labour Market and the Informal Sector in Vietnam," Economics Papers from University Paris Dauphine 123456789/10624, Paris Dauphine University.
  12. Nordman, Christophe J. & Robilliard, Anne-Sophie & Roubaud, François, 2011. "Gender and ethnic earnings gaps in seven West African cities," Labour Economics, Elsevier, vol. 18(S1), pages S132-S145.
  13. Wolff, François-Charles & Nordman, Christophe Jalil, 2010. "Gender Differences in Pay in African Manufacturing Firms," Economics Papers from University Paris Dauphine 123456789/10806, Paris Dauphine University.
  14. Clément Imbert, 2011. "Decomposing wage inequality: Public and private sectors in Vietnam 1993-2006," PSE Working Papers halshs-00564653, HAL.
  15. Gong, Xiaodong & Van Soest, Arthur & Villagomez, Elizabeth, 2004. "Mobility in the Urban Labor Market: A Panel Data Analysis for Mexico," Economic Development and Cultural Change, University of Chicago Press, vol. 53(1), pages 1-36, October.
  16. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
  17. Strobl, Eric & Thornton, Robert, 2002. "Do Large Employers Pay More in Developing Countries? The Case of Five African Countries," IZA Discussion Papers 660, Institute for the Study of Labor (IZA).
  18. Maloney, William F, 1999. "Does Informality Imply Segmentation in Urban Labor Markets? Evidence from Sectoral Transitions in Mexico," World Bank Economic Review, World Bank Group, vol. 13(2), pages 275-302, May.
  19. Matteo Migheli, 2011. "Do the Vietnamese Support the Economic Doi Moi ?," Journal of Development Studies, Taylor & Francis Journals, vol. 48(7), pages 939-968, September.
  20. Philippe Bocquier & Christophe Nordman & Aude Vescovo, 2010. "Employment Vulnerability and Earnings in Urban West Africa," Working Papers DT/2010/05, DIAL (Développement, Institutions et Mondialisation).
  21. Ivan A. Canay, 2011. "A simple approach to quantile regression for panel data," Econometrics Journal, Royal Economic Society, vol. 14(3), pages 368-386, October.
  22. Koenker, Roger, 2004. "Quantile regression for longitudinal data," Journal of Multivariate Analysis, Elsevier, vol. 91(1), pages 74-89, October.
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Cited by:
  1. Aysýt Tansel & Elif Öznur Kan, 2012. "The Formal/Informal Employment Earnings GAP: Evidence From Turkey," Working Papers 2012/23, Turkish Economic Association.
  2. Christophe Nordman & Faly Rakotomanana & François Roubaud, 2012. "Informal versus Formal: A Panel Data Analysis of Earnings Gaps in Madagascar," Working Papers DT/2012/12, DIAL (Développement, Institutions et Mondialisation).
  3. Mireille Razafindrakoto & François Roubaud & Jean-Michel Wachsberger, 2012. "Santé, Inégalités et ruptures sociales à Antananarivo, Premiers résultats de l’enquête SIRS 2003," Working Papers DT/2012/10, DIAL (Développement, Institutions et Mondialisation).
  4. Philippe De Vreyer & François Roubaud, 2013. "Urban Labor Markets in Sub-Saharan Africa," World Bank Publications, The World Bank, number 15808, February.

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