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Measurements and Determinants of Pay Inequality and its Impacts on Firms Performance in Vietnam

Author

Listed:
  • Nam Tran-Quy
  • Almas Heshmati

    (Technology Management, Economics, and Policy Program (TEMEP), Seoul National University)

Abstract

This study is an empirical investigation of causal factors of pay inequality and its relationship with firm performance using firm level data in Vietnam. Both nonparametric and parametric approaches are used for the purpose. The Gini coefficient and Theil-T index are employed to measure pay inequality. Linear and quadratic models are specified to identify determinants of pay inequality and to investigate the relationship between pay inequality and firm performance. The empirical results, based on a large sample of Vietnamese firms, suggest that capital-intensive sectors pay more equal wages than labour-intensive sectors while regions with a higher urbanization rate and economic development pay their employees quite unequally. The determinant factors contributing to pay inequality are firm size, volume of assets, share of temporary workers, debt ratio, provincial competitiveness and the market size. We also find a positive relationship between firm performance and pay inequality, which gives support to the ¡°tournament¡± theory.

Suggested Citation

  • Nam Tran-Quy & Almas Heshmati, 2009. "Measurements and Determinants of Pay Inequality and its Impacts on Firms Performance in Vietnam," TEMEP Discussion Papers 200930, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Nov 2009.
    • Handle: RePEc:snv:dp2009:200930
    as

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    File URL: http://temep-repec.my-groups.de/DP-30.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Pay inequality; firms; determinants; performance; Vietnam;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • P27 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Performance and Prospects

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