How education affects economic development: Human resource development and labor market dynamics

[2F210] Educational Returns and Decent Work in Vietnam: Analyzing Firm Ownership Types

Seonkyung CHOI¹, *Ryuto MINAMI², Keiichi OGAWA² (1. Hiroshima University, 2. Kobe University)

Keywords:Return to Education, Decent Work

Conventional labor market models have demonstrated the significance of education in predicting earnings, occupational success, and decent work outcomes. However, these models often focus on wage earners in formal economies, potentially overlooking the complexities of developing countries with significant informal sectors. This study examines the relationship between education and decent work outcomes in Vietnam, a rapidly developing country with a large informal economy. Using data from the Vietnam Household Living Standards Survey (VHLSS) 2020, we investigate the returns to education in terms of four compensation-related decent work dimensions: hourly wages, official contracts, social insurance, and paid leave. We employ an instrumental variable approach, using the worker's mother's education as an instrument for years of schooling to address potential endogeneity issues. Our analysis reveals heterogeneous effects of educational returns across different firm ownership types, including individual, private, state-owned, and foreign investment firms. To account for Vietnam's rapid advances in education, we control for cohort effects in our model, distinguishing between the impact of increased years of schooling and the general upward trend in educational attainment.We find that additional years of schooling generally lead to positive returns across all ownership types, but the magnitude and significance of these returns vary. State-owned enterprises show the highest returns to education for wages, while private firms demonstrate the strongest relationship between education and non-wage decent work indicators. These findings contribute to our understanding of the school-to-work transition in Vietnam and highlight the importance of considering firm ownership when analyzing educational returns. Our results have implications for education and labor market policies in Vietnam and potentially other developing countries with similar economic structures.