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The wage labor market and inequality in Viet Nam in the 1990s

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  • Gallup, John Luke

Abstract

Has the expansion of wage employment in Vietnam exacerbated social inequalities, despite its contribution to income growth? Gallup uses the two rounds of the Vietnamese Living Standards Survey (VLSS) to evaluate the contribution of wage employment to inequality and income growth over the period of rapid economic growth in the 1990s following market reforms. If Vietnam sustains its economic development in the future, wage employment will become an ever more important source of household income as family farms and self-employed household enterprises become less prevalent. Observing the recent evolution of wage employment compared with farm and non-farm self-employment provides clues as to how economic development will change Vietnamese society, in particular its impact on income inequality within and between communities. The author shows that standard methods for calculating income inequality can be severely biased due to measurement error when decomposing the contribution of different sectors, regions, or groups to overall inequality. A new method for consistent decomposition of inequality by income source shows that despite the rapid growth of wages in the 1990s, wage inequality fell modestly. Contrary to the results of uncorrected methods, wage employment contributes a roughly similar amount to overall income inequality as other nonagricultural employment (household enterprise and remittances, mainly). Agricultural income actually reduces overall income inequality because inequality between agricultural households is much lower than inequality between nonagricultural households, and agricultural income has a lower correlation with other income sources. Wage employment has not been the locus of growing disparity between the haves and the have-nots in Vietnam. A declining share of agriculture as the economy grows in Vietnam means that income inequality will rise, assuming that within-sector inequality does not change. This rising inequality, due to the shrinking share of agriculture, will be difficult to avoid without giving up economic growth and rapid poverty reduction in Vietnam. Historically, the process of economic development has always brought about a transition out of small farms and household enterprises into wage employment as worker productivity increases and non-household enterprises dominate the economy.

Suggested Citation

  • Gallup, John Luke, 2002. "The wage labor market and inequality in Viet Nam in the 1990s," Policy Research Working Paper Series 2896, The World Bank.
    • Handle: RePEc:wbk:wbrwps:2896
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    References listed on IDEAS

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    1. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, March.
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    Cited by:

    1. Bulent Esiyok & Mehmet Ugur, 2017. "A Spatial Regression Approach To Fdi In Vietnam: Province-Level Evidence," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 62(02), pages 459-481, June.
    2. 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.
    3. Remco H. Oostendorp & Doan Hong Quang, 2011. "The Impact of Trade Liberalization on the Return to Education in Vietnam: Wage versus Employment Effect," Tinbergen Institute Discussion Papers 11-060/3, Tinbergen Institute, revised 04 Apr 2011.
    4. Rachmat Mulia & Elisabeth Simelton & Tan Quang Nguyen & Magnus Jirström, 2021. "Non-Farm Activities and Impacts beyond the Economy of Rural Households in Vietnam: A Review and Link to Policies," Sustainability, MDPI, vol. 13(18), pages 1-22, September.
    5. McGuinness, Seamus & Kelly, Elish & Pham, Thi Thu Phuong & Ha, Thi Thu Thuy & Whelan, Adele, 2021. "Returns to education in Vietnam: A changing landscape," World Development, Elsevier, vol. 138(C).
    6. Phan, Diep & Coxhead, Ian, 2013. "Long-run costs of piecemeal reform: Wage inequality and returns to education in Vietnam," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1106-1122.
    7. Bui, Anh Tuan & Nguyen, Cuong Viet & Pham, Thu Phuong & Phung, Duc Tung, 2022. "Female leadership and borrowing constraints: Evidence from an emerging economy," International Review of Financial Analysis, Elsevier, vol. 81(C).
    8. 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).
    9. 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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    More about this item

    Keywords

    Economic Theory&Research; Poverty Impact Evaluation; Labor Policies; Environmental Economics&Policies; Services&Transfers to Poor; Inequality; Environmental Economics&Policies; Poverty Impact Evaluation; Governance Indicators; Services&Transfers to Poor;
    All these keywords.

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    1. Vietnam in Wikipedia Galician
    2. 越南 in Wikipedia Chinese
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