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

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Author Info

  • Huu Chi Nguyen

    ()
    (Centre of Economics, University Paris Nord (CEPN), DIAL, IRD, Paris)

  • Christophe Nordman

    ()
    (UMR DIAL- IRD Université Paris-Dauphine)

  • François Roubaud

    ()
    (UMR DIAL- IRD Université Paris-Dauphine)

Abstract

(english) 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 the Vietnam’s labour market specificity. _________________________________ (français) En dépit d'un poids économique massif dans les pays en développement, on sait peu de choses sur la structure des revenus du secteur informel, notamment en comparaison du secteur formel. En tirant avantage de l'enquête VHLSS au Vietnam, et en particulier des trois vagues de données de panel (2002, 2004, 2006), nous examinons l'ampleur du différentiel de rémunération formel/informel en tenant compte de l'hétérogénéité à trois niveaux différents : celle des travailleurs, de leurs emplois (salariés vs non salariés) et de la distribution des revenus. Nous estimons des modèles à effets fixes (standards et régressions quantiles) permettant de contrôler les caractéristiques inobservables des individus. Nos résultats montrent que le différentiel de rémunération dépend fortement du statut dans l'emploi et de la position relative dans la distribution des revenus. Dans certains cas, le secteur informel apparaît plus rémunérateur. La comparaison avec les études réalisées dans d'autres PED permet de mettre en lumière les spécificités du marché du travail au Vietnam.

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Bibliographic Info

Paper provided by DIAL (Développement, Institutions et Mondialisation) in its series Working Papers with number DT/2011/15.

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Length: 52 pages
Date of creation: Dec 2011
Date of revision:
Handle: RePEc:dia:wpaper:dt201115

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

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References

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  1. Fernández, Rosa M. & Nordman, Christophe J., 2009. "Are there pecuniary compensations for working conditions?," Labour Economics, Elsevier, vol. 16(2), pages 194-207, April.
  2. Koenker, Roger, 2004. "Quantile regression for longitudinal data," Journal of Multivariate Analysis, Elsevier, vol. 91(1), pages 74-89, October.
  3. 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.
  4. Maloney, William F., 2004. "Informality Revisited," World Development, Elsevier, vol. 32(7), pages 1159-1178, July.
  5. repec:dau:papers:123456789/10658 is not listed on IDEAS
  6. Bocquier, Philippe & Nordman, Christophe Jalil & Vescovo, Aude, 2010. "Employment Vulnerability and Earnings in Urban West Africa," Economics Papers from University Paris Dauphine 123456789/4294, Paris Dauphine University.
  7. Roubaud, François & Razafindrakoto, Mireille & Cling, Jean-Pierre, 2012. "Explanatory factors behind formalizing non-farm household businesses in Vietnam," Economics Papers from University Paris Dauphine 123456789/11191, Paris Dauphine University.
  8. 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.
  9. Jean-Pierre Cling & Mireille Razafindrakoto & Francois Roubaud, 2010. "Assessing the Potential Impact of the Global Crisis on the Labour Market and the Informal Sector in Vietnam," Working Papers 05, Development and Policies Research Center (DEPOCEN), Vietnam.
  10. Paolo Falco & Andrew Kerr & Neil Rankin & Justin Sandefur & Francis Teal, 2010. "The Returns to formality and Informality in Urban Africa," CSAE Working Paper Series 2010-03, Centre for the Study of African Economies, University of Oxford.
  11. McKenzie, David & Sakho, Yaye Seynabou, 2007. "Does It Pay Firms to Register for Taxes? The Impact of Formality on Firm Profitability," IZA Discussion Papers 3179, Institute for the Study of Labor (IZA).
  12. 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.
  13. Rand, John & Torm, Nina, 2012. "The Benefits of Formalization: Evidence from Vietnamese Manufacturing SMEs," World Development, Elsevier, vol. 40(5), pages 983-998.
  14. Cling, Jean-Pierre & Marouani, Mohamed Ali & Razafindrakoto, Mireille & Robilliard, Anne-Sophie & Roubaud, François, 2009. "The distributive impact of Vietnam’s accession to the WTO," Economics Papers from University Paris Dauphine 123456789/4321, Paris Dauphine University.
  15. Olivier Bargain & Prudence Kwenda, 2010. "Is Informality Bad? - Evidence from Brazil, Mexico and South Africa," Working Papers 201003, School Of Economics, University College Dublin.
  16. 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.
  17. 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.
  18. 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.
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  20. Christophe J. Nordman & François-Charles Wolff, 2009. "Gender differences in pay in African manufacturing firms," Working Papers hal-00421227, HAL.
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Cited by:
  1. Tansel, Aysit & Kan, Elif Oznur, 2012. "The Formal/Informal Employment Earnings Gap: Evidence from Turkey," IZA Discussion Papers 6556, Institute for the Study of Labor (IZA).
  2. 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).
  3. Nordman, Christophe Jalil & Rakotomanana, Faly & Roubaud, François, 2012. "Informal versus Formal: A Panel Data Analysis of Earnings Gaps in Madagascar," Economics Papers from University Paris Dauphine 123456789/10601, Paris Dauphine University.
  4. Philippe De Vreyer & François Roubaud, 2013. "Urban Labor Markets in Sub-Saharan Africa," World Bank Publications, The World Bank, number 15808, August.

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