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Return to schooling in Vietnam during economic transition: Does return to schooling in Vietnam reach its peak?

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  • Doan, Tinh
  • John, Gibson

Abstract

A common phenomenon about transition economies is that the return to schooling improves as economic reform progresses. Existing research suggests that Vietnam is not an exception to the pattern. However, the rate of return in period from 1992 to 1998 is still relatively low, below 5 percent, relative to that of the world and other transitional economies. And it is hard to see a clear trend in the current literature due to different methods applied and sets of variables controlled in the earnings equations (see Appendix B). The low returns may result from the gradual economic reforms applied in Vietnam, whilst in Eastern European countries the “Big Bang” transformation was conducted. Therefore, to test whether the return to schooling in Vietnam is rising and reaches other transitional economies’ rate of returns, we re-examine the trend in the rate of return to schooling in Vietnam over the 1998-2008 period, when the reforms have had a longer time to have an effect. We apply the OLS and Heckman selection estimator (Maximum Likelihood approach) and find that the return has increased quickly during the later economic reform but its pace has slowed down when the return reached the global average rate of returns at somewhere between 9 and 10 percent.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24986.

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Date of creation: 21 Apr 2010
Date of revision: 30 Aug 2010
Handle: RePEc:pra:mprapa:24986

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Keywords: economic transition; returns to schooling; Vietnam;

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  1. Fleisher, Belton M., 2005. "Returns to schooling in transition: The Chinese, European, and Russian experiences," Journal of Comparative Economics, Elsevier, vol. 33(2), pages 223-226, June.
  2. Psacharopoulos, George, 1994. "Returns to investment in education: A global update," World Development, Elsevier, Elsevier, vol. 22(9), pages 1325-1343, September.
  3. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, Econometric Society, vol. 47(1), pages 153-61, January.
  4. Belton M. Fleisher & Klara Sabirianova Peter & Xiaojun Wang, 2004. "Returns to Skills and the Speed of Reforms: Evidence from Central and Eastern Europe, China, and Russia," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 2004-703, William Davidson Institute at the University of Michigan.
  5. Orazem, Peter F & Vodopivec, Milan, 1995. "Winners and Losers in Transition: Returns to Education, Experience, and Gender in Slovenia," World Bank Economic Review, World Bank Group, World Bank Group, vol. 9(2), pages 201-30, May.
  6. Brainerd, Elizabeth, 1998. "Winners and Losers in Russia's Economic Transition," American Economic Review, American Economic Association, American Economic Association, vol. 88(5), pages 1094-1116, December.
  7. Moock, Peter R. & Patrinos, Harry Anthony & Venkataraman, Meera, 2003. "Education and earnings in a transition economy: the case of Vietnam," Economics of Education Review, Elsevier, Elsevier, vol. 22(5), pages 503-510, October.
  8. Tinh T. Doan & John Gibson, 2009. "Do Returns to Schooling Go Up During Transition? The Not So Contrary Case of Vietnam," Working Papers in Economics, University of Waikato, Department of Economics 09/08, University of Waikato, Department of Economics.
  9. George Psacharopoulos & Harry Anthony Patrinos, 2004. "Returns to investment in education: a further update," Education Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 12(2), pages 111-134.
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