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Vietnam - on the road to labor-intensive growth ?


  • Belser, Patrick


Since Vietnam's adoption of the doi moi or renovation policy in 1986, the country has been undergoing the transition from central planning to a socialist market-oriented economy. This has translated into strong economic growth, led by the industrial sector, which expanded more than 13 percent a year from 1993 to 1997. Vietnamese policymakers are concerned, however, that employment growth has lagged. To address this concern, the author compares new employment data from the Vietnam Living Standards Survey (VLSS 2), completed in 1997-98, with data from the first household survey undertaken in 1992-93. He shows that in 1993-97, industrial employment grew an average of about 4 percent a year, which is low compared with industrial GDP growth. This slower growth was attributable to the capital-intensive, import-substituting nature of the state sector and foreign investment, which dominate industry. The more labor-intensive, export-oriented domestic private sector is still small, although growing quickly. In the future, growth promises to become more labor-intensive. Before the Asian crisis there were signs of anemerging export-oriented sector. Using previous statistical analysis (Wood and Mayer 1998) as well as factor content calculations, the author estimates that given Vietnam's endowment of natural and human resources, Vietnam could triple its manufacturing exports and create about 1.6 million manufacturing jobs in export sectors in the near future. After examining Vietnam's labor regulations, the author concludes that there is no need for basic reform of the labor market. At current levels, minimum wages and nonwage regulations (even if better enforced) are unlikely to inhibit development of the private sector or hurt export competitiveness. But a restrictive interpretation of the Labor Code's provisions on terminating employment could hurt foreign investment, reduce the speed of reform in the state sector, and slow the reallocation of resources to the domestic private sector.

Suggested Citation

  • Belser, Patrick, 2000. "Vietnam - on the road to labor-intensive growth ?," Policy Research Working Paper Series 2389, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2389

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    References listed on IDEAS

    1. Anne O. Krueger, 1983. "Trade and Employment in Developing Countries, Volume 3: Synthesis and Conclusions," NBER Books, National Bureau of Economic Research, Inc, number krue83-1, January.
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    3. Gruber, Jonathan, 1997. "The Incidence of Payroll Taxation: Evidence from Chile," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 72-101, July.
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    5. Agrawal, Nisha, 1996. "The benefits of growth for Indonesian Workers," Policy Research Working Paper Series 1637, The World Bank.
    6. Agrawal, Nisha, 1995. "Indonesia - Labor market policies and international competitiveness," Policy Research Working Paper Series 1515, The World Bank.
    7. Wood, Adrian & Mayer, Jorg, 2001. "Africa's Export Structure in a Comparative Perspective," Cambridge Journal of Economics, Oxford University Press, vol. 25(3), pages 369-394, May.
    8. John Pencavel, 1996. "The Legal Framework for Collective Bargaining in Developing Economies," Working Papers 97008, Stanford University, Department of Economics.
    9. Datt, Gaurav & Ravallion, Martin, 1998. "Why Have Some Indian States Done Better Than Others at Reducing Rural Poverty?," Economica, London School of Economics and Political Science, vol. 65(257), pages 17-38, February.
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    Cited by:

    1. Yoko Niimi & Puja Vasudeva Dutta & L. Alan Winters, 2015. "Trade Liberalisation and Poverty Dynamics in Vietnam," World Scientific Book Chapters,in: Non-Tariff Barriers, Regionalism and Poverty Essays in Applied International Trade Analysis, chapter 16, pages 333-365 World Scientific Publishing Co. Pte. Ltd..
    2. MartÌn Rama, 2002. "The Gender Implications of Public Sector Downsizing: The Reform Program of Vietnam," World Bank Research Observer, World Bank Group, vol. 17(2), pages 167-189, September.
    3. Tran, Tuyen & Doan, Tinh, 2010. "Industrialization, economic and employment structure changes in Vietnam during economic transition," MPRA Paper 26979, University Library of Munich, Germany, revised 25 Nov 2010.
    4. FANG Zheng & Chris SAKELLARIOU, 2010. "After the Reforms: Determinants of Wage Growth and Change in Wage Inequality in Vietnam - 1998 -2008," Economic Growth Centre Working Paper Series 1006, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    5. Harvie, C., 2001. "Competition Policy and SMEs in Vietnam," Economics Working Papers wp01-10, School of Economics, University of Wollongong, NSW, Australia.
    6. Fukase, Emiko, 2013. "Export Liberalization, Job Creation, and the Skill Premium: Evidence from the US–Vietnam Bilateral Trade Agreement (BTA)," World Development, Elsevier, vol. 41(C), pages 317-337.


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