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Education as Protection? The Effect of Schooling on Non-Wage Compensation in a Developing Country

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  • Dang, Thang

Abstract

This is the first paper identifying the causal effect of schooling on non-wage compensation using data from Vietnam. The paper takes an advantage of the establishment of the compulsory primary schooling reform that was introduced in Vietnam in 1991 to instrument for exogenous variations in years of schooling to surmount the endogeneity problem as a primary threat to idenfication facing the causal effect estimation. The paper finds that education is positively associated with non-wage benefits. In particular, the baseline 2SLS estimates indicates that one additional year of schooling is causally linked to a 6 percentage point increase in the likelihood of receiving monetary payments for public holidays, a 4.6 percentage point increase in the likelihood of receiving monetary employee benefits, a 7.3 percentage point increase in the likelihood of having annual paid leave and a 6.8 percentage point increase in the likelihood of having firm-provided social insurance. The baseline estimates are strongly robust to the estimates from some robustness checks. The paper also inspects that the causal associations between schooling and formal employment, skilled occupation and employee-friendly firm are three potential mechanisms through which schooling causally affects non-wage compensation.

Suggested Citation

  • 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.
  • Handle: RePEc:pra:mprapa:79223
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    More about this item

    Keywords

    Returns to schooling; Non-wage compensation; Developing countries;

    JEL classification:

    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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