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 THE IMPACT OF TECHNOLOGY ADOPTION ON EMPLOYMENT STRUCTURES AND LABOR PRODUCTIVITY A CASE STUDY IN VIETNAM MANUFACTURING FIRMS FROM 2007 TO 2013 BY NGUYEN HUONG NGUYEN MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, NOVEMBER 2015 1 TIEU LUAN MOI download : skknchat@gmail.com 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 THE IMPACT OF TECHNOLOGY ADOPTION ON EMPLOYMENT STRUCTURES AND LABOR PRODUCTIVITY A CASE STUDY IN VIETNAM MANUFACTURING FIRMS FROM 2007 TO 2013 A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By NGUYEN HUONG NGUYEN Academic Supervisor: PROF. NGUYEN TRONG HOAI HO CHI MINH CITY, NOVEMBER 2015 2 TIEU LUAN MOI download : skknchat@gmail.com Declaration “The thesis entitled “The impact of technology adoption on employment structures and labor productivity. A case study in Vietnam manufacturing firms form 2007-2013” is the requirement for the degree of Master of Art in Development Economics to the Vietnam – The Netherland Programme (VNP).” Nguyen Huong Nguyen 3 TIEU LUAN MOI download : skknchat@gmail.com Acknowledgments I have taken efforts in writing this thesis. However, it would not have been possible without the kind support of many people.
I would like to extend my sincere thanks to all of them. I wish to express my deep sense of gratitude and thanks to my supervisor, Prof. Nguyen Trong Hoai for his invaluable guidance and constant encouragement which has sustained my efforts at all the stages of this thesis work. Sincere thanks also go to Dr.
Pham Khanh Nam for his valuable comments and suggestions for my concept note as well as for his enthusiasm of helping me collecting data. It is also my duty to record my gratefulness to all VNP lecturers who have helped and taught me a great deal of useful knowledge. My appreciations go to my classmates who have willingly helped me out with their abilities and accompanied with me at VNP during two years. I am also very much thankful to VNP officers and librarian for all their assistances of available lab room, library and study materials.
Finally, I owe a debt of gratitude to my parents for inspiring me and keeping me going to this work. Nguyen Huong Nguyen 4 TIEU LUAN MOI download : skknchat@gmail.com Abbreviations ASEAN : Association of Southeast Asian Nations NBER : The National Bureau of Economic Research OECD : Organization for Economic Co-operation and Development U.S : The United States R&D : Research and Development DANIDA : Danish International Development Agency FDI : Foreign Direct Investment SOEs : State-Owned Enterprises GSO : General Statistics Office CIEM : Central Institute for Economics Management GDP : Gross Domestic Product APO : Asian Productivity Organization HIDS : Human Identification Solutions Conference VRA : Vietnam Rubber Association MIT : Ministry of Industry and Trade 5 TIEU LUAN MOI download : skknchat@gmail.com Abstract This study investigates directly the impact of technology adoption on employment structures and labor productivity in Vietnamese manufacturing firms by using the panel data from the Survey of Small and Medium Scale Manufacturing Enterprises (SMEs) from 2007 to 2013. Results show that adopting technologies into production positively affects the share of professionals including engineers, technicians, accountant/economist and other professionals in Vietnamese manufacturing firms. However, applying manually operated machineries and operated computers could lead to the decrease in added value per worker while other factory equipments seem not to have any effect.
The study also finds that the capital-intensive firms hire more nonproduction workers and gain higher labor productivity. Keywords: Technology adoption; employment structures; labor productivity; operated personal computer; factory equipment; manufacturing firms. 6 TIEU LUAN MOI download : skknchat@gmail.com Table of contents Chapter 1: Introduction. The scope of the study.
The structure of the study .13 Chapter 2: Literature review. Technology and technology adoption. The relationship between technology adoption and employment structures. The relationship between technology adoption and labor productivity.
The relationship between firm characteristics and employment structures. The relationship between firm characteristics and labor productivity. The relationship between capital-labor ratio and labor productivity as well as the correlation of capital-labor ratio and employment structures .23 Chapter 3: Data and Research methodology .31 Chapter 4: Technological revolution, employment structures and labor productivity in Vietnam manufacturing firms. Summary of the chapter: .38 7 TIEU LUAN MOI download : skknchat@gmail.com Chapter 5: Empirical Results.
For the sample. For the specified industries. Summary of the chapter. Conclusion and policy recommendation .69 8 TIEU LUAN MOI download : skknchat@gmail.com List of tables Table 3.1: Employment structures in SMEs .2: Definition of variables .1: Technological content of manufactured exports (%, 2000, 2008) .5: Labor productivity by firm size and location .1: List of considered industries .4: The summary of statistics by mean of each industry .5: The coefficient signs between employment structures and other independent variables .7: The coefficient signs between the proportion of professional workers and other independent variables .8: The coefficient signs between the proportion of sales and office workers and other independent variables .9: The coefficient signs between the labor productivity and other independent variables .10: The coefficient signs among the employment structures, labor productivity and other independent variables in the manufacture of food .11: The coefficient signs among the employment structures, labor productivity and other independent variables in the manufacture of textile .12: The coefficient signs among the employment structures, labor productivity and other independent variables in the manufacture of wood and of products of wood and cork, except furniture; manufacture of articles of straw and plaiting materials .13: The coefficient signs among the employment structures, labor productivity and other independent variables in the manufacture of rubber and plastics products .14: The coefficient signs among the employment structures, labor productivity and other independent variables in the manufacture of fabricated metal products, except machinery and equipment .59 9 TIEU LUAN MOI download : skknchat@gmail.15: The coefficient signs among the employment structures, labor productivity and other independent variables in the manufacture of furniture.60 List of figures Figure 3.1: The structure of industries considered .1: The proportion of enterprises that obtained a new technology by location and size.2: Levels of labor productivity per hour worked, 1970-2010 .1: Changing in employment structures form 2007-2013 .2: Added value per worker .3: Numbers of machineries and computer used .42 List of appendix Appendix 1-Table 4.3: Worker Composition by Occupation (%) .4: Labor productivity by Sector from 2009-2013 .2: Description of variables .3: Description of variables .74 Appendix 6-Correlation Matrix of variables .76 Appendix 7- Harris-Tzavalis unit root test .78 Appendix 8- Testing multicolinearity among variables by using VIF .80 Appendix 9-Testing multicolinearity among variables without BOTH variable by using VIF test .82 Appendix 10- List of industries in SMEs.85 10 TIEU LUAN MOI download : skknchat@gmail.com Chapter 1: Introduction 1.
Problem Statement In many advanced countries over the past several decades, technology has become an important part in most workplaces. According to the United State’s Bureau of Labor Statistics research in 1987, the rapid development and widespread of technology is increasing in many industries, which helps manufacturers reduce costs and compete more effectively in both domestic and overseas markets. Along with the wave of technologies, plenty of studies have already shown empirical evidence that the introduction of advanced technologies in manufacturing has changed the structures of employment and improved the labor productivity. For example, Eli Berman, John Bound, Zvi Griliches (1993) and Doms, Dunne and R.
Troske (1997) by assuming that nonproduction workers represent for a more skilled group of workers, authors investigated that the requirement of effectively adapting new techniques from innovation gradually increases the demand for skilled workers and technology are mainly responsible for job loss among low-skilled employees. Moreover, researchers also argued that such use of technology helps workers get more tasks done within a short time to gain in productivity. In Vietnam, the manufacturing sector plays a crucial role as the main driving force of economic and productivity growth. This sector contributes the most in Vietnam’s GDP, creates stable jobs as well as contributes to the foreign trade in both export and import (Le and Harvie, 2010; Huong, 2014).
In the situation the globalization and international competition have become important and innovation is the essence of competitiveness. Especially, the establishment of ASEAN Economic Community in 2015, that requires Vietnam has to concentrate more on investing in advanced technology and rely more on productivity to increase competition in global markets (World Bank, 2014). Over more than three decades since economic reforms and industrialization in 1986, the great deal of new technologies has been introduced into Vietnam (Thuy, 2009). With the advantages 11 TIEU LUAN MOI download : skknchat@gmail.com of low-cost labor forces and many supports from government to foreign investments, Vietnam has attracted a variety of technologically advanced and higher value-added manufacturers.
That means there is a relative demand for skilled- workers corresponding to the acceleration of technology upgrading (Autor, Katz and Krueger, 1998). Simultaneously, McCaig and Pavcnik (2013) stated that there had been the striking movements of Vietnamese employment from agriculture sector toward manufacturing and services sectors. Considerably, manufacturing sector experienced a rapid growth in labor productivity and a large employment expansion in workforces. Therefore, with the same spirit to Doms, Dunne and R.
Troske (1997) and Liu, Tsou and Hammett (2000), this study aims to investigate whether technology adoption affects on employment structure between non- production workers and production workers as well as whether technology adoption could improve the labor productivity in Vietnamese manufacturing firms from 2007 to 2013. However, almost studies used cross-sectional analysis to explore the impact of advanced technology on nonproduction worker’s share and labor productivity in manufacturing firms. Doms, Dunne and R. Troske (1997) also showed the results of time-series analysis but they found it insignificant.
This study tries using panel data to estimates the correlation between technology adoption and manufacturing employment structures as well as labor productivity in Vietnam, the issue seems to draw little attention in developing countries involving Vietnam. Moreover, understanding the effect of technology adoption on employment structures and labor productivity could help Vietnamese policymakers propose various suitable strategies to enhance the quality of labor and labor productivity, anticipate drawbacks of technology progress on manufacturing labor and increase the national competitiveness in the international market. 12 TIEU LUAN MOI download : skknchat@gmail. Research objectives: The purpose of this paper is to reach the two following research objectives: (1) Investigate the effect of technology adoption on employment structure between non-production workers and production workers in Vietnamese manufacturing enterprises.
(2) Investigate the effect of technology adoption on labor productivity in Vietnamese manufacturing firms. Research questions The study is to investigate the impact of technology adoption on employment structures and productivity in Vietnamese manufacturing firms. The purpose of this paper is to address two main research questions: (1) Do technological advanced companies have a larger share of nonproduction workers? (2) Do technological advanced companies gain higher productivity? 1. The scope of the study The study will examine the influences of technology adoption on employment structures and productivity in term of Vietnamese manufacturing enterprises.
The firm panel data used in this paper is collected from the Survey of Small and Medium Scale Manufacturing Enterprises (SMEs) in Vietnam from 2007 to 2013. These firms are classified according to the two-digit categories of The International Standard Industrial Classification of All Economic Activity (ISIC)4 from 10 to 33. The structure of the study The research is organized as follow. Chapter 1 is a chapter of introduction.
Chapter 2 briefly reviews the existing theoretical and empirical literature on relationship between technology and employment structures and the impact of technology on labor productivity. Chapter 3 describes the research methodology. 13 TIEU LUAN MOI download : skknchat@gmail.