Decomposing the Labor Market Earnings Inequality: The Public and Private Sectors in Vietnam, 1993-2006
In contrast with the typical transition to a market economy, earnings inequality in Vietnam between 1993 and 2006 appears to have decreased, and the earnings gap in favor of public employees appears to have widened. The paper uses a comparative adv...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2013/01/17205551/decomposing-labor-market-earnings-inequality-public-private-sectors-vietnam-1993-2006 http://hdl.handle.net/10986/13130 |
| Summary: | In contrast with the typical transition
to a market economy, earnings inequality in Vietnam between
1993 and 2006 appears to have decreased, and the earnings
gap in favor of public employees appears to have widened.
The paper uses a comparative advantage model to disentangle
the effect of sorting workers across sectors from the effect
of the differences in returns to workers' skills. The
selection of the best workers into the public sector is
clearly an important component of the explanation for the
public-private sector earnings gap, but the widening of this
gap over time is primarily due to changes in the
compensation patterns. The paper finds that, in the 1990s,
public employees were underpaid compared with their earning
potential in the private sector whereas, in the early 2000s,
public employees earned similar returns to their comparative
advantage in the public and private sectors. The increasing
homogeneity in returns to skills in the Vietnamese labor
market appears to explain both the increase in the
public-private pay gap and the decrease in overall inequality. |
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