Have the returns to education really increased in Vietnam? Wage versus employment effect

Many studies have analyzed changes in the returns to education in globalizing economies using the Mincerian framework. These studies have typically estimated the returns to education in terms of changes in wages rather than employment, effectively ignoring the fact that during globalization not only wages but also employment patterns are affected. In this paper we use four large-scale representative household surveys from the transition economy Vietnam for the period 1998-2006 to estimate the returns to education taking into account both changes in wages and employment. The results show that the estimated increases in returns to education are lower once changes in employment patterns are taken into account.

► We show analytically how changes in the returns to education depend on changes in wage and employment patterns. ► We use four large-scale representative household surveys from the transition economy of Vietnam for the period 1998-2006. ► There have been large shifts in employment in Vietnam especially between the import substituting and export oriented sectors. ► Changes in the returns to education are overestimated if the shifts in employment patterns are ignored.