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Education and earnings in a transition economy (Vietnam)

Author

Listed:
  • Moock, Peter R.
  • Patrinos, Harry Anthony
  • Venkataraman, Meera

Abstract

The transition from a centrally planned to a market economy is likely to have a strong impact on the labor market, on relative earnings, and on returns to education. Major economic reforms in Vietnam since 1986 (the policy known as"Doi Moi") have included a number of measures to liberalize the labor market. It is too soon to assess the full impact of these reforms, but the authors analyze the returns to education, on the basis of earnings in 1992-93 (collected in the first Vietnam Living Standards Survey). This represents one of the first country-wide analyses of the monetary benefits of schooling in Vietnam at a time when the labor market was in transition. On average, the estimated rates of returns are still relatively low, which is to be expected, since salary reforms were not introduced until 1993. Average private rates of return to primary education (13 percent) and university education (11 percent) are higher than those to secondary and vocational education (only 4 to 5 percent). Returns to higher education are slightly higher for women (12 percent) than for men (10 percent). Evidence from other transition economies suggests that returns are likely to increase as reforms in the labor market take full effect. The results support this hypothesis: Returns for younger Vietnamese workers (14 percent) are considerably higher than for older workers (only 4 percent). Implications for policymaking: 1) it is important to monitor future earnings and trends in the labor market, as updates of this analysis could provide more robust estimates of the transition's effects on earnings and returns to education. 2) At a time when the Vietnamese government is reassessing its pricing policy, the fact that private rates of return to higher education are relatively high suggests the potential for greater cost recovery. 3) Efforts to improve efficiency in secondary and higher education could increase the rate of return by lowering costs.

Suggested Citation

  • Moock, Peter R. & Patrinos, Harry Anthony & Venkataraman, Meera, 1998. "Education and earnings in a transition economy (Vietnam)," Policy Research Working Paper Series 1920, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1920
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    References listed on IDEAS

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    Cited by:

    1. Ran Abramitzky & Victor Lavy, 2014. "How Responsive Is Investment in Schooling to Changes in Redistributive Policies and in Returns?," Econometrica, Econometric Society, vol. 82(4), pages 1241-1272, July.
    2. Nguyen, Tuan D., 2016. "Social reproduction in Vietnam: Educational attainment, employment, and skills usage," International Journal of Educational Development, Elsevier, vol. 51(C), pages 10-22.
    3. Blunch, Niels-Hugo & Canagarajah, Sudharshan & Goyal, Sangeeta, 2002. "Short- and long-term impacts of economic policies on child labor and schooling in Ghana," Social Protection Discussion Papers and Notes 25527, The World Bank.
    4. Daeheon Choi & Chune Young Chung & Ha Truong, 2019. "Return on Education in Two Major Vietnamese Cities," Sustainability, MDPI, vol. 11(18), pages 1-30, September.

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