Trade liberalization, labor allocation and income dynamics in Vietnam

It has been about 30 years since Vietnam launched Doi Moi (Renovation), the economy as well as its labor market have radically changed. The thesis investigates labor allocation across different economic and institutional sectors as well as income dynamics of laborers in Vietnam in that episode. Furthermore, it examines the effects of opening the domestic market and minimum wage schemes as representative elements of economic circumstances and regulations on the two processes. The first chapter analyzes labor allocation and income dynamics of different economic and institutional sectors in different areas with varying levels of urbanization. The second chapter investigates the effects of the minimum wage increases on employment rates, labor allocation and wage distribution with taking into account lagged effects on employment effects. The third chapter studies the effects of opening the domestic market on the two processes. The contribution of the thesis has threefold. Firstly, it provides a comprehensive picture structural change in Vietnam labor market since Doi Moi with different responses of the labor market in different macro-economic conditions as well as different locations. Furthermore, a complete estimation of productivity of all stakeholders in the economy for a more than decade provides explanations for several dynamics in the labor market. Secondly, the thesis provides estimations of impacts of minimum wage increases on the labor market taking into account trends and lagged effects. Thirdly, the thesis take into accounts heterogeneities in the informal sector in investigating effects of opening the domestic market on the labor allocation and income gaps.

Keywords: Structural changes, Labor allocation, Income gap, Minimum wage, Opening the domestic market.