---- i; UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM- NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS MIGRANTS AND NON-MIGRANTS WAGE DIFFERENTIALS IN SOUTHEAST PROVINCES OF VIETNAM A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By PHAN THI HONG NHUNG -••u~••·,.t I I r--~·· E-~~; ~- ; 'i Academic Supervisor: ti :. I NGUYEN HUU DUNG x::I J1 ~1 o6. 1 ~""~~~~-- HO CHI MINH CITY, June 2010 11 UAN VAN CHAT LUONG download : add luanvanchat@agmail.com - - ----------------- CERTIFICATION I hereby certify that the substance of this thesis has not been submitted for any degrees and is not being currently submitted for any other degrees. I also certify that, to the best of my knowledge, and any help received in preparing the thesis and all sources used have been acknowledged in the thesis.
Phan Thi Hong Nhung Date: June, 2010 iii UAN VAN CHAT LUONG download : add luanvanchat@agmail.co ACKNOWLEDGEMENT This research is impossible completed without the valuable guidance, encouragement and advice from numerous individuals including Vietnam-Netherlands program lecturers, friends and my family members. I would like to express my special thanks to all people to what they have done for my thesis completion. First of all, I would like to send my deepest gratitude to my supervisor, Dr. Nguyen Huu Dung who always gives valuable instructions, advice and comments during my completion of the thesis.
I also send my special thanks to Associate Professor Nguyen Trong Hoai for his lectures in econometrics, Mr. Truong Thanh Vu, the lecturers of Vietnam-Netherlands project, for their kind help and instructions in data analysis by Stata software and Mr. Le Cong Tam- MDE 12, Phan Thi Lien- MDE 14 for their support in the process of data mining. Many especially respectful thanks are sent to my family for encouraging and providing me with an opportunity to pursue my desires in higher learning.
And finally, I would like to express my special thanks to my friends in MDE class 14 for their supportive friendship from the beginning day I joined the VNP program, and their continuous support during my research completion. Above all, please sympathize for me and do know that I would be so grateful for those who support me a lot in this thesis completion if I forget to mention their names. IV UAN VAN CHAT LUONG download : add luanvanchat@agmail.com ------------- - - --- --------- ABSTRACT This study examines the wage differentials between migrant workers and non-migrant workers. Based on data from Vietnam Migration Survey in 2004, earnings equations with and without Instrumental Variable (IV) are estimated for migrant workers and non- migrant workers.
From these results, the study compares the wage structure for migrant workers and non-migrant workers. Oaxaca decomposition of the wage differentials of the two groups workers are carried out. Results, which are controlled for observed characteristics and selection bias, indicate some main points. The wage differentials between non-migrant and migrant workers are mostly due to the difference in structural factors.
Besides, there are differences in endowment factors. v UAN VAN CHAT LUONG download : add luanvanchat@agmail. 1v List of Tables. viii List of Figures.
x List of Abbreviations. xi CHAPTER 1: INTRODUCTION 1. 3 CHAPTER 2: LITERATURE REVIEW 2. Definition of migration.
Reviews oftheoretical framework. Related to migration. Human capital theory. Harris- Torado model for migration.
Related to wage determination and wage differentials. 9 VI UAN VAN CHAT LUONG download : add luanvanchat@agmail. Previous empirical studies. 18 CHAPTER 3: RESEARCH METHODOLOGY 3.
Earnings differentials measurement. Definition of variables used in study. Introduction ofthe data set. The reliability of the data set.
31 CHAPTER 4: OVERVIEW OF MIGRATION IN HO CHI MINH CITY, BINH DUONG AND DONG NAI PROVINCE 4. A profile of migrants and non-migrants in HoChiMinh City, Dong Nai and Binh Duong. 34 VII UAN VAN CHAT LUONG download : add luanvanchat@agmail. Type of activity.
Duration of residence. Monthly average income classified by gender and regions. Monthly average income classified by types of occupation and regions. Monthly average income classified by sectors and regions.
Monthly average income classified by education levels and regions. Monthly average income classified by characteristics of migrant and non-migrant workers. 46 CHAPTER 5: DETERMINANTS OF EARNINGS AND WAGE DIFFERENTIALS OF MIGRANTS AND NON-MIGRANTS 5. Determinant of earnings.
Estimation results of model 1 with OLS and 2SLS. The effect of year since migration on migrant's earnings (model 2). Determinants of earnings for migrants and non-migrants (model 1). Wage differentials with Oaxaca's method.
57 CHAPTER 6: CONCLUSION AND POLICY IMPLICATION 6. 61 viii UAN VAN CHAT LUONG download : add luanvanchat@agmail. Limitation ofthe research. 63 REFERENCES APPENDICES IX UAN VAN CHAT LUONG download : add luanvanchat@agmail.com • LIST OF TABLES Table 3.1: Definitions and notations of variables Table 4.1: Distribution of age structure by current residence, migrant status and gender (%) Table 4.2: Distribution of sex ratio by age structure current residence and migrant status (%) Table 4.3: Distribution of the obtained highest education level by current residence, migrant status and gender (%) Table 4.4: Distribution of the types of activity by current residence and migrant status(%) Table 4.5: Monthly average earnings (thousand VND) by current residence, migration status, age group and gender Table 4.6: Distribution of duration residence of migrants m current residence by household registration status Table 4.7: Distribution of types of occupation by current residence, migrant status Table 4.8: Monthly average income classified by gender and regions Table 4.9: Monthly average income classified by types of occupation and regions Table 4.10: Monthly average income classified by sectors and regions Table 4.11: Monthly average income classified by education levels and region Table 4.12: Monthly average income classified by characteristics of migrant and non- migrant worker Table 5.1: Estimation results of model 1 with OLS and 2SLS Table 5.2: Testing for endogeneity Table 5.3: The correlation matrix between the explanatory variable and its instrument Table 5.4: The effect of year since migration on earnings for migrants (model2) X UAN VAN CHAT LUONG download : add luanvanchat@agmail.5: Estimating results ofmodell for migrants and non-migrants Table 5.6: Earnings differentials between migrants and non-migrants by Oaxaca's method xi UAN VAN CHAT LUONG download : add luanvanchat@agmail.com • LIST OF FIGURES Figure 4.1: Percentage of employed by current residence and migration status Figure 4.2: Monthly average earnings (thousand VND) by current residence, migration status, age group xii UAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF ABBREVIATION GSO : General Statistical Office HCMC : Ho Chi Minh City H-T model :Harris- Todaro model IV : Instrument Variable OLS : Ordinary Least Square 2SLS : Two - Stage Least Square VHLSS :VietNam Household Living Standards Survey VND : Vietnam Dong UNFPA :the United Nations Population Funds xiii UAN VAN CHAT LUONG download : add luanvanchat@agmail.com CHAPTER! INTRODUCTION 1.
Problem statement Since the year of 1986, Vietnam has gone through a process of Doi Moi toward a market- oriented economy. Besides, it is widely recognized that urbanization is inevitable and that population movements are integral features of the process of growth, which make many changes on Vietnamese labor market. One of the outstanding changes is that increasing the participation level in labor force of migrants. In fact, migration is an inevitable result of development because Vietnam has been developing fast after reforms in the last 1980.
Therefore, the increasing migration level is not amazed. Comparing the data of general investigation in 1989 and 1999 shows that migration level rises about the third (GSO, 2005). The increasing portion of migration moves primarily to the urban areas, especially big cities as Ho Chi Minh City and HaNoi, and adjacent industrial zones to these cities such as Binh Duong and Dong Nai industrial parks. In this thesis, Ho Chi Minh City and Binh Duong, Dong Nai provinces are selected to study about migrants and non - migrants wage differentials.
Because they are one of potential economically centers with economic - cultural - social development strongly. Hence, these provinces are places where attract lot of migrants. Migration is a mainly contributive source to urbanization. The analysis of urban development factors in Vietnam via using data of general population survey in 1999 shows that, in urban areas, migration contributes more 1/3 growth of population at these areas.
At the same time, migration contributes above 50 percent growth of population in big cities as HaNoi and Ho Chi Minh City (GSO, 2005). UAN VAN CHAT LUONG download : add luanvanchat@agmail. According to statistics of General Statistics Office, in 2004, the rate of migrants in above studied areas increase nearly double compared to the year 1999 (from 9. While migration is often blamed for the overcrowding, pollution and unemployment issues in the destination, migration constitutes an important labor force in Ho Chi Minh city, Binh Duong and Dong Nai provinces.
From the conducted researches in Vietnam shows that most of migrants receive the benefits to economic aspect from their movement. Many migration studies in Vietnam reveal that the participation level in labor force of migrants is higher than non - migrants and they often seek a job before movement; besides, they earn more income compare to the earned income level that they receive with the same job in their homeland. However, nearly all migrants have also faced with disadvantages compared to natives with respect to educational level, employment status, etc. Like many other cities and industrial zones, migration also causes the earnings differentials.
An earnings gap can be observed between migrants and non - migrants. Therefore, there are several considerations to examine wage differentials among labors, especially between migrants and non - migrants. Lower returns to migrants in these areas labor market could be due to many different reasons. Probably, important crucial reasons are the migrants' lack of specific knowledge, skills or experience.
Moreover, the demand for some particular skills acquired in homeland might be nonexistent. Another explanation, probably most applicable to migrants from poor countryside, is that the quality of the schooling and experience obtained in the homeland is lower than the quality of schooling and experience in big cities. A number of studies show that this is also the case in other cities (Bratsberg and Ragan, 2002; Friedberg, 2000; Schoeni, 1997). All of above problems mentioned an emergent issue, which is whether the earnings gap exists in Vietnam, especially in big city and industrial parks such as Ho Chi Minh City and Southeast Industrial Zone (including Binh Duong and Dong Nai provinces).
In the case the wage gap exits, what factors contribute to this problem? From that issue, government should propose which policies to reduce this gap and to attract the talents in these areas. 2 UAN VAN CHAT LUONG download : add luanvanchat@agmail. Research objectives The aims of this thesis are: •!• To provide a better understanding of the demographic and socio - economic characteristics of migrant and non-migrant workers in Ho Chi Minh, Binh Duong and Dong Nai •!• To investigate the determinants of earnings of migrants and non-migrants •!• To examine factors contributing to migrant and non- migrant wage differentials in the study area. Research questions In order to achieve the above objectives, this research will answer the following questions: ( 1) Are there differences in demographic and socio - economic characteristics of migrants and non-migrants? (2) What are the determinants affecting earnings of migrants and non-migrants? (3) What factors contribute to migrants and non - migrants wage differentials in Ho Chi Minh city and Binh Duong, Dong Nai provinces? 1.