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Who Suffers the Penalty? A Panel Data Analysis of Earnings Gaps in Vietnam

Author

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  • Nordman, Christophe J.
  • Nguyen, Huu Chi
  • Roubaud, François

Abstract

In spite of its predominant economic weight in developing countries, little is known about informal sector income dynamics vis-à-vis the formal sector. Some works have been done in this field using household surveys, but they only consider some emerging Latin American countries and a few African countries. As a matter of consequence, there is still no way to generalize the (diverging) results to other part of the developing world. Taking advantage of the rich VHLSS dataset in Vietnam, in particular its three waves panel data (2002, 2004, 2006), we assess the magnitude of various formal/informal earnings gaps while addressing heterogeneity issues at three different levels: the worker, the job (wage employment vs. selfemployment) and the earnings distribution.We estimate fixed effects and quantile regressions to control for unobserved individual characteristics. Our results suggest that the informal sector earnings gap highly depends on the workers' job status and on their relative position in the earnings distribution. Penalties may in some cases turn into premiums. By comparing our results with studies in other developing countries, we draw conclusions highlighting the Vietnam's labour market specificity.

Suggested Citation

  • Nordman, Christophe J. & Nguyen, Huu Chi & Roubaud, François, 2011. "Who Suffers the Penalty? A Panel Data Analysis of Earnings Gaps in Vietnam," Proceedings of the German Development Economics Conference, Berlin 2011 60, Verein für Socialpolitik, Research Committee Development Economics.
  • Handle: RePEc:zbw:gdec11:60
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    informal employment; earnings gap; transition matrix; quantile regressions; panel data; Vietnam;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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