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Returns to education in Vietnam: A clustered data approach

By: Nguyen Thi Ngoc Thanh - VNP 16

Supervisor: Dr. Nguyen Trong Hoai - Dr. Pham Khanh Nam

Moock et al. (2003) did an attempt to analyze the returns to education in Vietnam by using Mincer earnings function based on the 1992–93 Vietnam Living Standards Survey (VLSS) data. In this paper, I replicate the job of Moock et al. (2003) to re-estimate the returns to education by using the 2008 Vietnam Household Living Standard Survey (VHLSS) and Mincerian earnings functions, but with a different regression method, called clustered data at household level using panel commands.

The study reveals that (1) an additional year of schooling associates with 8.95% increasing in the average rate of return to education, comparing with only 5% in 1992/1993. In terms of gender gap, females experience higher returns to school than males (11.47% vs. 8.33%). This pattern is unchanged when referring to result in 1992/1993 (6.8% vs. 3.4%); (2) workers in public sector get higher rates of return to education than those in private sector (9.95% vs. 5.59%). However, foreign sector is the one has the highest rates of return among the three, 11.9%; (3) university is the best option for schooling investment with the rate of return of 19% higher than upper secondary level while this number was 11% in 1992/1993. Primary level brings back 16% rate of return vs. no level (13% in 1992). The rates are 10% for vocational vs. primary (4% in 1992); 8% for upper secondary vs. lower secondary; while only 2% for lower secondary vs. primary.

Keywords: return to schooling, | education | Vietnam Human Capital | Mincer earnings function | clustered data | random effect model