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From fields to factories: Special economic zones, foreign direct investment, and labour markets in Vietnam

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  • Tafese, Tevin
  • Lay, Jann
  • Van Tran

Abstract

Vietnam has integrated into global value chains through the establishment of special economic zones (SEZs). This paper examines the local labour-market impacts of this programme, building on a unique dataset of SEZs in combination with labour force survey (LFS) data. Using historical satellite imagery, we trace the built-up area of SEZs over time to construct a continuous measure of SEZ exposure, which we link to the LFSs at the districtyear level for 2013-2019. In a difference-in-differences design with continuous treatment, we find that SEZs have led to a rapid shift in employment from agriculture and services to manufacturing and to an improvement in the quality of employment through higher wages and more formal employment. Foreign firms drive these effects, but there are positive spillovers to workers in domestic firms in agriculture and services. The effects are particularly strong for women, and younger individuals with low and medium levels of education.

Suggested Citation

  • Tafese, Tevin & Lay, Jann & Van Tran, 2023. "From fields to factories: Special economic zones, foreign direct investment, and labour markets in Vietnam," GIGA Working Papers 338, GIGA German Institute of Global and Area Studies.
  • Handle: RePEc:zbw:gigawp:279817
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    More about this item

    Keywords

    Vietnam; Special Economic Zones; foreign direct investment; labour markets; structural change; informality;
    All these keywords.

    JEL classification:

    • 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
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J80 - Labor and Demographic Economics - - Labor Standards - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid

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