education and economic transition in viet nam 1993 -2006

Education and Economic Transition in Viet Nam

1993 - 2006

Hoang Van Kinh (1966 – 2008)Hanoi Foreign Trade University

Daniel Westbrook Georgetown University

School of Foreign Service in Qatar

• How did the payoff to education evolve as Viet Nam’s market transition progressed?

August 30, 2010 3Georgetown University SFS - Q

Research Question

Traditional Theories of Economic Development

• Todaro (1969) “… economic development is often defined in terms of the transfer of a large proportion of workers from agricultural to industrial activities.”

• Development policies based on this traditional view focused on accumulation of physical capital & protection of local industries.

• It was recognized that industrial economies required an adequate level of human capital.


Modern Theories of Economic Development

• Central role for human capital.

• Porter, Sachs, et al. (2002): acquisition of

“… increasingly sophisticated and productive ways of competing.”

• Hong Kong, Singapore, Taiwan, Korea were observed to manage this and to grow very rapidly.

• The East Asian Miracle, World Bank (1996).


Education & Individuals

• Access to better jobs & higher wages.

• Higher wages provide an incentive for individuals to invest in education and for parents to invest in their children’s educations.

• Underlying assumption: workers have access to a sophisticated labor market that compensates them for their productive attributes, including education.


Market Access

• Ability to interact with a sophisticated labor market.

• Sophisticated: a labor market that conveys timely and accurate information about demand and supply for a range of specialized occupations.

• In command economies jobs are administratively allocated and workers may not be compensated for investments in human capital.


Case Study: Viet Nam

• Transition from a command economy to a market-oriented economy over a relatively brief period (beginning in 1986 & ongoing).

• Excellent high-quality data sets are available.


Jan 17, 2008 9

Viet Nam’s GDP & Trade(billions of current USD)

(102.5 billion USD in 2010)

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

GDP b$

X + M

ASEAN /

AFTA

US / VN BTA

Dec 10, 2001

40 Bilateral Investment Treaties

1991 - 2000

WTO 1 / 11 / 07

Normalized

Relations

w ith USA

Jan 17, 2008 10

Viet Nam’s Real GDP Growth Rates 1991 - 2010

Jan 17, 2008 11

Viet Nam’s Sectoral Growth Rates 1991 - 2010

Viet Nam’s Poverty Rates(based on official national poverty lines)

Estimates for food poverty in 1986 range as high as 78 – 85%.

Jan 17, 2008 12

National Education Policies

• 1991 law on compulsory education

– By 2000 all children complete primary education.

• 1998 education law

– By 2010

• All children of appropriate age should complete primary education.

• All children of appropriate age should complete lower secondary education.

• By 2005 achieve these targets in 50% of the provinces.

August 30, 2010 Georgetown University SFS - Q 13

National Education Policies

• 2005 Education law

– Seeks social equity in educational opportunities with special emphasis on opportunities for children of households that qualify for social programs aimed at the poor and other disadvantaged groups.

• In mid-2000s education spending was about 15% of public spending (57% of which went to higher education).


Data(n = number of households surveyed)

• VLSS 1992-1993 (n = 4200)

• VLSS 1997-1998 (n = 4600)

• VHLSS 2002 (n = 75,000)

• VHLSS 2004 (n = 45,000)

• VHLSS 2006 … (n = 9,600*)


Educational Attainment1993 - 2004


Grade Group Female Male Female Male Female Male Female Male

Rural Minority 40.09 56.27 43.63 57.40 44.56 56.32 49.86 63.08

>= 5 All Rural 56.82 72.78 59.86 74.00 70.27 78.30 72.45 81.23

All Urban 74.73 84.28 74.95 79.82 86.24 90.47 87.50 92.54

Rural Minority 18.33 25.69 19.83 30.22 18.97 24.53 24.15 32.67

>= 9 All Rural 30.70 41.07 33.24 45.25 39.61 48.39 43.48 52.75

All Urban 49.21 57.90 50.51 57.57 62.19 68.27 65.82 72.38

Rural Minority 3.42 6.73 2.53 6.70 5.47 7.00 7.23 9.00

>= 12 All Rural 7.30 11.76 7.38 12.13 12.30 16.63 14.46 20.50

All Urban 21.68 28.41 23.48 27.53 38.17 42.06 41.92 47.40

Grade Group Female Male Female Male Female Male Female Male

Rural Minority - - - - - - 57.04 55.03

>= 5 All Rural 34.18 29.41 68.60 57.03 71.59 65.09 79.25 77.20

All Urban 60.32 60.38 92.40 86.49 84.67 82.51 90.45 86.89

Rural Minority - - - - - - 35.20 31.88

>= 9 All Rural 14.99 15.46 39.93 38.40 45.55 40.04 60.94 56.22

All Urban 33.33 40.99 76.33 63.99 65.59 62.26 80.00 74.72

Rural Minority - - - - - - 16.05 10.37

>= 12 All Rural 6.03 12.77 13.00 17.40 24.69 20.39 30.40 26.16

All Urban 23.26 6.89 51.16 47.71 60.33 42.46 56.82 48.23

Proportion of Adults 19 - 65 Completing At Least Grades 5, 9, 12

1993 1998 2002 2004

Proportion of Children Age 11, 15, 18 Completing At Least Grades 5, 9, 12

1993 1998 2002 2004

Impact of Educationon Household Welfare

• How much does education contribute to household welfare ?

• Measure household welfare by real per-capita consumption expenditures.

• Does the impact of education vary with the degree of labor market development?

• Technical issues

– Whose education matters?

– Control for unobservablesAugust 30, 2010 17Georgetown University SFS - Q

Estimation

• Household welfare depends on:S = schooling

X = marketization index for the labor market

S*X = interaction between marketization index and schooling

A = ability (which is unobservable)

Z = household and community characteristics

August 30, 2010 18

ε + β Z+ X×Sβ + Xβ + Sβ + β = welfare z 3 2 1 0

Georgetown University SFS - Q

Technical Issues

• Who’s schooling matters?– Household head

– Household head / spouse

– Most-educated individual

– Average among working adults in household

• Ability is unobservable and is correlated with schooling & welfare.– How can the effect of schooling be disentangled from that of ability?

– Use average education of age / gender / location cohorts to isolate the component of individual’s schooling that is independent of ability.

• Does position in the welfare distribution matter?


“Marketization”

• Impact of schooling on household welfare depends on the presence and sophistication of the labor market.

• The conventional measure is distance from the nearest local market or business center.

• We use the proportion of working adults in the commune who work for wages or salaries. The range is from 0 to 70%.

• Other possibilities: • wage + salary share of total income

• measured diversity in types of jobs held by the local labor force


Patterns in RPCE(2004)


7

7.5

8

8.5lo

g(R

PC

E)

10 20 30 40 50Experience

edu = none edu 1 - 8 years

edu 9 - 11 years edu >= 12 years

log(RPCE) vs Experience 2004

7

7.5

8

8.5

log(R

PC

E)

0 5 10 15Education

exp 1 - 5 exp 6 - 10 exp 11 - 20

exp 21 - 30 exp 31 - 45

log(RPCE) vs Education 2004

% Change in RPCE Relative to No Schooling (IV)

August 30, 2010 22

% Change in RPCE with Schooling, Relative to No Schooling

IV Est 2004. Mktz at 10th pctile, median, 90th pctile, maximum

0.0000

20.0000

40.0000

60.0000

80.0000

100.0000

120.0000

140.0000

160.0000

1 2 3 4 5 6 7 8 9 10 11 12

Mktz = 0.08

Mktz = 0.22

Mktz = 0.38

Mktz = 0.65


% Change in RPCE Relative to No Schooling (various years)

August 30, 2010 23

% Change RPCE Relative to No Schooling IV Estimates

0.0000

50.0000

100.0000

150.0000

200.0000

250.0000

300.0000

350.0000

400.0000

1 2 3 4 5 6 7 8 9 10 11 12

Years of Schooling

1993

1998

2002

2004


% Change in RPCE Relative to No Schooling (bottom and top of welfare distribution)


% Changes RPCE with Education at 20th and 90th Quantiles

0.00

20.00

40.00

60.00

80.00

100.00

120.00

1 2 3 4 5 6 7 8 9 10 11 12

20th Percentile

90th Percentile

Conclusions

• Impact of Education on household welfare is positive and increases with development of the labor market.

• Estimated impact of education was largest in the earliest year we examined.

• Estimated impact of education is higher for better-off households.

• Very strong incentive to acquire additional schooling.


education and economic transition in viet nam 1993 -2006

Education

education law

higher education

compulsory education

national education policies

s education spending

lower secondary education

viet nams market transition

viet nam1993