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Is There a Public Sector Wage Premium in Vietnam? New Evidence From the Vietnam Household Living Standard Survey

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  • Van‐Phuc Phan
  • Martin O'Brien

Abstract

The identification of a public sector wage premium or penalty is of specific interest in fast and emerging economies, particularly those that have transitioned from state controlled to market economies. Using Vietnam as a case study, our initial descriptive statistics analysis showed that average hourly wage rates for public sector workers exceeded those for private sector workers from 2014 to 2020. However, after applying a propensity score matching (PSM) method and controlling for worker and job characteristics, remuneration for a public sector worker was between 17.6% and 27.8% lower than that for a private sector worker. Further exploration of this result revealed that the public sector employs a large proportion of university graduates; however, it pays a lower return to human capital compared to the private sector. The main policy implication from our findings is that the government is likely to face a public sector skills shortage in the future unless it significantly increases the returns to education in its remuneration policies.

Suggested Citation

  • Van‐Phuc Phan & Martin O'Brien, 2025. "Is There a Public Sector Wage Premium in Vietnam? New Evidence From the Vietnam Household Living Standard Survey," Australian Economic Papers, Wiley Blackwell, vol. 64(3), pages 345-355, September.
    • Handle: RePEc:bla:ausecp:v:64:y:2025:i:3:p:345-355
    DOI: 10.1111/1467-8454.12399
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