Decomposing Vietnamese gender equality in terms of wage distribution

• Date: 01 December 2018
• Published date: 01 December 2018
• Author: Hiroyuki Yamada,Tien M. Vu
• DOI: http://doi.org/10.1111/1468-0106.12269

ORIGINAL MANUSCRIPT

Decomposing Vietnamese gender equality in terms

of wage distribution

Tien M. Vu

1,2

| Hiroyuki Yamada

3

1

Asian Growth Research Institute, Fukuoka, Japan

2

Osaka University, Osaka, Japan

3

Faculty of Economics, Keio University, Tokyo,

Japan

Correspondence

Tien M. Vu, Asian Growth Research Institute

11–4 Otemachi, Kokura-kita, Kitakyushu,

Fukuoka 803–0814, Japan.

Email: vu@agi.or.jp

Funding information

Asian Growth Research Institute, Grant/Award

Number: Research Project; Japan Society for the

Promotion of Science, Grant/Award Number:

15H01950, 18K12784; Keio Gijuku Academic

Development Funds; MEXT Joint Usage/Research

Centre at the Institute of Social and Economic

Research, Osaka University

Abstract

We decompose the gender wage gap in terms of wage dis-

tribution in Vietnam during 2002–2014 using two

methods. The first method uses two estimated counterfac-

tual distributions; the second uses an estimated recentred

influence function. We focus on the formal sector and find

evidence for a consistent gender wage gap, with the price

of skills being the main contributor. In contrast, labour

market discrimination does not have a crucial influence.

Some gender equality gained by the distribution of skills

can be explained by the rise in women’s education and

women’s participation in specific industries, occupations

and the growing private sector.

1|INTRODUCTION

Economic growth has generally led to better employment opportunities for Vietnamese women. Dur-

ing 2002–2014, Vietnam experienced average annual GDP growth in excess of 5%. At the same time,

as shown in Figure 1, a sharp increase occurred in the number of employees of private firms. Such

firms replaced the collapsed state-owned enterprises which were once the most important employers

in the economy. These changes, together with the US–Vietnam Bilateral Trade Agreement (BTA) in

December 2001 and Vietnam’s accession to the World Trade Organization (WTO) in 2007, have led

to fierce competition among firms for labour and, consequently, an increased number of formal job

offers. Vietnam’s low overall fertility rate (currently less than 1.95 children per female) and improved

levels of education have also provided the time and opportunity for Vietnamese women to participate

in the labour force and accept these new job offers. This is evidenced by a female labour participation

rate of 73% in 2014 compared with 82% for men (UNDP, 2015). Moreover, the ratio of women to

men per type of job in some categories has increased, as shown in Figure 2.

However, it is not known whether labour market discrimination against women has declined or become

more severe in terms of wage distribution during this period of strong growth and improved employment

opportunities. In an increasingly competitive business market, firms must minimize costs or fail. However,

according to Becker (1971), any discrimination against gender raises firms’costs. Thus, gender

Received: 10 November 2017 Revised: 23 March 2018 Accepted: 3 April 2018

DOI: 10.1111/1468-0106.12269

Pac Econ Rev. 2018;23:705–731. wileyonlinelibrary.com/journal/paer © 2018 John Wiley & Sons Australia, Ltd 705

discrimination should decline or even disappear in correspondence with the level of competitiveness, as

Becker (1971) predicts. In addition, structural change (reallocating labour from agriculture, aquaculture and

forestry to other industries), free trade (with greater job opportunities and increased competitiveness among

firms) and professional specialization induce differences by gender in decisions to invest in human capital.

Thus, gender wage equality may vary in terms of wage distribution. Indeed, evidence exists that general

wage equality has both improved and worsened at various points during 2002–2014 (ILO, 2015).

In terms of empirical evidence, Sakellariou and Fang (2014) observe a decrease in overall private sec-

tor wage inequality in Vietnamese households owing to the increase in the minimum wage between 1998

and 2008. Unfortunately, it is not known whether the gender wage gap in Vietnam persisted. The prefer-

ence for a son (Vu, 2014) and the dominance of Confucianism in the country could also be impediments

to decreasing the gender wage gap and may perhaps even increase it. Other forms of derived discrimina-

tion are the so-called sticky floors and glass ceilings. These kinds of gender discrimination tend to remain

severe in either the right or left tails of income distribution; thus, women are hindered in gaining access to

better (and higher-paid) positions and are kept in low-paid positions. Consequently, detecting and tracking

sticky floors and glass ceilings helps to provide valuable insights into labour market policies.

In such a context, this study’s purpose is to decompose the gender wage gap in terms of wage dis-

tribution in Vietnam during 2002–2014, to identify the important factors which contribute to the gap,

to examine how structural changes influence gender wage gap distribution, and to investigate the

presence of labour market gender discrimination and any glass ceiling/sticky floor. We apply

methods developed by Chernozhukov, Fernandez-Val, and Melly (2013) and Firpo, Fortin, and

Lemieux (2009) to decompose the distribution of the gap into three components; namely,

0 20 40 60

2000 2005 2010 20152000 2005 2010 2015

Work for SOEs Work for PDEs Work for FOEs Work for collective

Percentage

Year

(a) (b)

FIGURE 1 Percentage of employees by economic sector, gender and year: (a) female and (b) male

Source. Authors’calculations from the Vietnamese Household Living Standard Survey 2002, 2006, 2010 and 2014.

Notes. FOEs, foreign-owned (affiliated) enterprises; PDEs, private domestic (non-foreign) enterprises; SOEs, state-owned enterprises

706 VU AND YAMADA