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Decomposing wage inequality: Public and private sectors in Vietnam 1993-2006

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  • Clément Imbert

    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris - Institut national de la recherche agronomique (INRA))

Abstract

This paper studies the labor market in Vietnam during the transition towards market economy (1993-2006): we show that the public-private sector wage gap markedly increased, but that wage inequality decreased overall. Our aim is to assess how much of this evolution can be explained by workers' productive skills and their allocation between sectors. We use a simple, yet innovative, method that allows us to take into account workers' unobservable characteristics and their remuneration in each sector. Throughout the period we consider, public sector workers are more skilled than private sector workers. However, rising returns to workers' skills in the public sector play a major role in the increase of the public-private sector gap. Against all expectations, the public sector grew richer as Vietnam moved towards market economy. Finally, a greater homogeneity among labor market participants seems to explain the overall decline in wage inequality.

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Bibliographic Info

Paper provided by HAL in its series PSE Working Papers with number halshs-00564653.

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Date of creation: Feb 2011
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Handle: RePEc:hal:psewpa:halshs-00564653

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Related research

Keywords: transition ; inequality decomposition ; public sector;

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References

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  1. Belser, Patrick & Rama, Martin, 2001. "State ownership and labor redundancy - estimates based on enterprise-level data from Vietnam," Policy Research Working Paper Series 2599, The World Bank.
  2. Siminski, Peter, 2008. "What Would the Average Public Sector Employee be Paid in the Private Sector?," Economics Working Papers wp08-05, School of Economics, University of Wollongong, NSW, Australia.
  3. Eswar Prasad & Michael P. Keane, 2002. "Changes in the Structure of Earnings During the Polish Transition," IMF Working Papers 02/135, International Monetary Fund.
  4. José Mata & José A. F. Machado, 2005. "Counterfactual decomposition of changes in wage distributions using quantile regression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(4), pages 445-465.
  5. Bargain, Olivier & Melly, Blaise, 2008. "Public Sector Pay Gap in France: New Evidence Using Panel Data," IZA Discussion Papers 3427, Institute for the Study of Labor (IZA).
  6. Murat Iyigun & Dani Rodrik, 2004. "On the Efficacy of Reforms: Policy Tinkering, Institutional Change, and Entrepreneurship," NBER Working Papers 10455, National Bureau of Economic Research, Inc.
  7. Richard Disney & Amanda Gosling, 1998. "Does it pay to work in the public sector?," Fiscal Studies, Institute for Fiscal Studies, vol. 19(4), pages 347-374, November.
  8. Azam, Mehtabul & Prakash, Nishith, 2010. "A Distributional Analysis of the Public-Private Wage Differential in India," IZA Discussion Papers 5132, Institute for the Study of Labor (IZA).
  9. Amanda Gosling & Thomas Lemieux, 2001. "Labour Market Reforms and Changes in Wage Inequality in the United Kingdom and the United States," NBER Working Papers 8413, National Bureau of Economic Research, Inc.
  10. Bales, Sarah & Rama, Martin, 2001. "Are public sector workers underpaid? - Appropriate comparators in a developing country," Policy Research Working Paper Series 2747, The World Bank.
  11. Glinskaya, Elena & Lokshin, Michael, 2005. "Wage differentials between the public and private sector in India," Policy Research Working Paper Series 3574, The World Bank.
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Citations

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Cited by:
  1. Nordman, Christophe J. & Nguyen, Huu Chi & Roubaud, François, 2011. "Who Suffers the Penalty? A Panel Data Analysis of Earnings Gaps in Vietnam," Proceedings of the German Development Economics Conference, Berlin 2011 60, Verein für Socialpolitik, Research Committee Development Economics.
  2. Phan, Diep & Coxhead, Ian, 2012. "Long-Run Costs of Piecemeal Reform: Wage Inequality and Returns to Education in Vietnam," Staff Paper Series 566, University of Wisconsin, Agricultural and Applied Economics.
  3. Oostendorp, Remco H. & Doan, Quang Hong, 2013. "Have the returns to education really increased in Vietnam? Wage versus employment effect," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 923-938.
  4. Paolo Falco & Luke Haywood, 2013. "Entrepreneurship versus Joblessness: Explaining the Rise in Self-Employment," Discussion Papers of DIW Berlin 1334, DIW Berlin, German Institute for Economic Research.

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