Education and Economic Transition in Viet Nam 1993 -2006
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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
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• How did the payoff to education evolve as Viet Nam’s market transition progressed?
August 30, 2010 3Georgetown University SFS - Q
Research Question
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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.
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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).
August 30, 2010 5Georgetown University SFS - Q
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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.
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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.
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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.
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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
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Jan 17, 2008 10
Viet Nam’s Real GDP Growth Rates 1991 - 2010
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Jan 17, 2008 11
Viet Nam’s Sectoral Growth Rates 1991 - 2010
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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
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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.
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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).
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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*)
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Educational Attainment1993 - 2004
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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
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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
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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
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ε + β Z+ X×Sβ + Xβ + Sβ + β = welfare z 3 2 1 0
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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?
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“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
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Patterns in RPCE(2004)
August 30, 2010 Georgetown University SFS - Q 21
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
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% Change in RPCE Relative to No Schooling (IV)
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% 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
Georgetown University SFS - Q
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% Change in RPCE Relative to No Schooling (various years)
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% 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
Georgetown University SFS - Q
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% Change in RPCE Relative to No Schooling (bottom and top of welfare distribution)
August 30, 2010 24Georgetown University SFS - Q
% 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
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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.
August 30, 2010 25Georgetown University SFS - Q
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