Long-Run Costs of Piecemeal Reform: Wage Inequality and Returns to Education in Vietnam

Diep Phan and Ian Coxhead
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Diep Phan: Beloit College

Staff Paper Series from University of Wisconsin, Agricultural and Applied Economics

Abstract: "Shock therapy" transitions in Eastern Europe facilitated movement of skilled workers into privatized industries offering high wage premia relative to state industries. Other transitional economies (notably China and Vietnam) have been slower to relinquish control over key industries and factor markets. Some costs of this piecemeal approach are now becoming apparent. We examine the spillover of continuing capital market distortions into the market for a complementary factor, skilled labor. Using Vietnamese data we find that capital market segmentation creates a two-track market for skills, in which state sector workers earn high salaries while non-state workers face lower demand and lower compensation. Growth is reduced directly by diminished allocative efficiency and incentives to acquire education, and indirectly by higher wage inequality and rents for workers with access to state jobs.

JEL-codes: F16 J31 P23 (search for similar items in EconPapers)
Date: 2012-05
New Economics Papers: this item is included in nep-dev, nep-lab, nep-lma, nep-sea and nep-tra
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Related works:
Journal Article: Long-run costs of piecemeal reform: Wage inequality and returns to education in Vietnam (2013)
Working Paper: Long-run costs of piecemeal reform: wage inequality and returns to education in Vietnam (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:wisagr:566

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