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From fields to factories: Special economic zones, foreign direct investment, and labour markets in Vietnam

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  • Tafese, Tevin
  • Lay, Jann
  • Tran, Van

Abstract

Vietnam's deep integration into GVCs has been driven by the establishment of special economic zones (SEZs). This paper examines the local labour market impacts of this SEZ programme. We trace the built-up area of SEZs over time to construct a novel continuous measure of SEZ exposure using historical satellite imagery. In a difference-in-differences design with continuous treatment, we examine the impact of SEZ exposure on local labour market outcomes at the district-level for the period 2009–2019. We find that the expansion of SEZs has led to a rapid shift in employment from own-account and family work in agriculture to manufacturing in foreign firms. We also show that SEZ exposure leads to higher wages and more formal employment contracts. Earnings improvements are not confined to workers in foreign manufacturing firms, but spill over to workers in household businesses and domestic firms. The effects on women account for most of these impacts.

Suggested Citation

  • Tafese, Tevin & Lay, Jann & Tran, Van, 2025. "From fields to factories: Special economic zones, foreign direct investment, and labour markets in Vietnam," Journal of Development Economics, Elsevier, vol. 174(C).
    • Handle: RePEc:eee:deveco:v:174:y:2025:i:c:s0304387825000185
    DOI: 10.1016/j.jdeveco.2025.103467
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    References listed on IDEAS

    as
    1. Abebe, Girum & McMillan, Margaret & Serafinelli, Michel, 2022. "Foreign direct investment and knowledge diffusion in poor locations," Journal of Development Economics, Elsevier, vol. 158(C).
    2. Cl'ement de Chaisemartin & Xavier D'Haultf{oe}uille, 2020. "Difference-in-Differences Estimators of Intertemporal Treatment Effects," Papers 2007.04267, arXiv.org, revised Dec 2024.
    3. Wang, Jin, 2013. "The economic impact of Special Economic Zones: Evidence from Chinese municipalities," Journal of Development Economics, Elsevier, vol. 101(C), pages 133-147.
    4. Matthew Cefalu & Brian G. Vegetabile & Michael Dworsky & Christine Eibner & Federico Girosi, 2020. "Reducing bias in difference-in-differences models using entropy balancing," Papers 2011.04826, arXiv.org.
    5. Goodman-Bacon, Andrew, 2021. "Difference-in-differences with variation in treatment timing," Journal of Econometrics, Elsevier, vol. 225(2), pages 254-277.
    6. Amy Y. C. Liu & Xin Meng (ed.), 2019. "Rural-Urban Migration in Vietnam," Population Economics, Springer, number 978-3-319-94574-3, September.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Vietnam; Special economic zones; Foreign direct investment; Labour markets; Structural change; Informality;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J80 - Labor and Demographic Economics - - Labor Standards - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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