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Long-Run Costs of Piecemeal Reform: Wage Inequality and Returns to Education in Vietnam

Author

Listed:
  • Phan, Diep

    (Beloit College)

  • Coxhead, Ian

    (University of WI)

Abstract

"Shock therapy" transitions in Eastern Europe facilitated movement of skilled workers into privatized industries offering high wage premia relative to state industries. Other transitional economies (notably China and Vietnam) have been slower to relinquish control over key industries and factor markets. Some costs of this piecemeal approach are now becoming apparent. We examine the spillover of continuing capital market distortions into the market for a complementary factor, skilled labor. Using Vietnamese data we find that capital market segmentation creates a two-track market for skills, in which state sector workers earn high salaries while non-state workers face lower demand and lower compensation. Growth is reduced directly by diminished allocative efficiency and incentives to acquire education, and indirectly by higher wage inequality and rents for workers with access to state jobs.

Suggested Citation

  • 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.
  • Handle: RePEc:ecl:wisagr:566
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Ian Coxhead & Rashesh Shrestha, 2017. "Globalization and School–Work Choices in an Emerging Economy: Vietnam," Asian Economic Papers, MIT Press, vol. 16(2), pages 28-45, Summer.
    2. Schmillen,Achim Daniel & Packard,Truman G., 2016. "Vietnam's labor market institutions, regulations, and interventions : helping people grasp work opportunities in a risky world," Policy Research Working Paper Series 7587, The World Bank.
    3. McGuinness, Seamus & Kelly, Elish & Pham Thi Thu, Phuong & Ha Thi Thu, Thuy, 2015. "Returns to Education and the Demand for Labour in Vietnam," Papers WP506, Economic and Social Research Institute (ESRI).
    4. Shaio Yan Huang & Chao-Hsiung Lee & Lee-Hsien Pan & Bich Hanh Nguyen Thi, 2016. "IPO Initial Excess Return in an Emerging Market: Evidence from Vietnam’s Stock Exchanges," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(02), pages 1-23, June.
    5. Nguyen, Thinh T. & Saito, Hisamitsu & Isoda, Hiroshi & Ito, Shoichi, 2015. "Balancing Skilled with Unskilled Migration in an Urbanizing Agricultural Economy," World Development, Elsevier, vol. 66(C), pages 457-467.
    6. Fujii, Tomoki, 2017. "Has the Development Gap between the Ethnic Minority and Majority Groups Narrowed in Viet Nam? Evidence from Household Surveys," ADBI Working Papers 661, Asian Development Bank Institute.
    7. Ian Coxhead & Diep Phan, 2013. "Princelings and Paupers? State Employment and the Distribution of Human Capital Investments Among Households in Viet Nam," Asian Development Review, MIT Press, vol. 30(2), pages 26-48, September.
    8. Dang, Thang, 2017. "Education as Protection? The Effect of Schooling on Non-Wage Compensation in a Developing Country," MPRA Paper 79223, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • P23 - Economic Systems - - Socialist Systems and Transition Economies - - - Factor and Product Markets; Industry Studies; Population

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