THESIS RATE OF RETURN FOR HIGHER EDUCATION IN VIETNAM COMMENT

RATE OF RETURN FOR HIGHER EDUCATION IN VIETNAM: A DISCIPLINE BASED COMPARATIVE ANALYSIS... CHAPTER 2: LITERATURE REVIEW 2.1 General Overview of Vietnamese Higher Education 2.1.1 Overvie

RATE OF RETURN FOR HIGHER EDUCATION IN VIETNAM: A

DISCIPLINE BASED COMPARATIVE ANALYSIS

CHAPTER 1: INTRODUCTION

1.1 Research rationales

Higher education in Vietnam has been highly appreciated by the public as well as policy-makers as a bachelor degree is believed to be a competitive advantage for future career On the other hand, college education is a priority of Vietnamese government

To realize their ambitious plan of having one top-200 university and 20,000 PhDs by

2020, Vietnam has spent nearly one percent of their GDP on higher education, compared to 0.15%, 0.53% and 0.32% for Myanmar, Indonesia and the Philippines, respectively (UNESCO, 2014)

This paper takes human capital theory as the foundation It considers individuals, not governments, as the investors in education It is an individual who chooses to continue schooling or not So, one popular question that has been asked by many universities and college students is: Is university education a good investment? The current boom of colleges and universities has raised doubts on the quality of higher education in Vietnam According to Valley and Wilkinson (2008), Vietnam lacks even

a singly university of recognized quality, and about half of Vietnamese university graduates are unable to find jobs in their area of specialization Hence, it is necessary

to make an investigation on rates of return to Vietnam college education based on comparative analysis of students’ majors

1.2 General Objectives

This thesis considers education as human capital investment and is designed to estimate the average rate of return to university/college education in Vietnam, from which assess its impact on individual career path and propose some possible recommendations

1.3 Specific Objectives

 Estimate the average rate of return to a university degree in Vietnam with comparative analysis using Mincer method

 Compare and contrast the estimated rate with previous studies and with other countries

 Provide a theoretical estimation model for rate of returns and based on that,

to propose some recommendations and suggestions for higher education in Vietnam

1.4 Thesis Structure

Chapter 1: Introduction

The first chapter provides background of the research topic, the benefits and significance of this research, research questions, research objectives, and research scope and the structure of this thesis

Chapter 2: Literature Review

To build a theoretical framework for this research, this chapter presents the relevant literature on the Vietnamese educational, the human capital investment as well

as point out the relation between rate of return and wage regression

Chapter 3: Data and Methodology

This section presents the research designs with quantitative approach, establishing hypotheses, and introduces sampling approach to support data collection

In addition, the chapter also provides a detailed description of the data used in this research, and data analysis methods

Chapter 4: Finding and Analysis

This part indicates the main findings after calculating the rate of return to college education in Vietnam It also seeks to compare and contrast with previous studies and with other countries, from which provides further discussion regarding these findings

Chapter 5: Implications and Recommendations

The final chapter generalizes the main conclusion as a summary of previous results and findings It also proposes some recommendations, limitations of this study, and suggestions for researches in the future

CHAPTER 2: LITERATURE REVIEW

2.1 General Overview of Vietnamese Higher Education

2.1.1 Overview on Vietnam Education System

Vietnamese educational system consists of 8 levels, from pre-school education

to the doctoral level Pre-school education is the first level which includes nursery and kindergarten with the duty to organize the nurturing, care and education of children aged between three and six years old Compulsory education lasts 12 years and is divided into 3 levels: primary (5 years), secondary (4 years) and high school (3-4 years) For high school level, there are 3 types: upper secondary (3 years) and professional secondary (3-4 years), along with vocational training centres in short-term (less than 1 year) or long-term (1-3 year) Students need to complete compulsory education to enter higher education including universities, colleges or academies After graduating from universities, individuals can attend post-graduate education to get the master degree (2 years) or doctor of philosophy (2-4 years)

Accordingly, university education is the higher education and not compulsory However, with the high requirement for higher-qualified human resource, a college degree is important for learners to find a good job in the future Students who graduate from high school and desire to participate in the university are obliged to take an entrance exam The entrance exam is held annually over the country in Mid-July Candidates are of all ages, religion, ethnicity and nationality The result of the exam will be widely publicized on the mass media Candidates who have questions about their results have the right to applying for verification Those who get the benchmark

or more are eligible for entering school

The curriculum of higher education in Vietnam last from four to six years In the first 2 years, the curriculum is general program The rest years are the time for specialized subjects or practicing After graduation, students are granted with a degree

of bachelor, engineer, and architect or doctor equivalent to their majority in the university No matter what the majority is, students are required to take part in the subject of national defense and security

2.1.2 Higher Education System in Vietnam

According to General Statistics Office of Vietnam (2017), there are more than

235 universities and colleges in Vietnam (excluding military universities), of which

235 are public and accounts for about 80% Public university education consists of

national universities (which are more prestigious, receive more State investment and

generally have greater autonomy), universities under Ministries (such as Academy of

Finance, Ho Chi Minh Academy of Politics, etc.), regional universities and universities

under People’s Committee of provinces University-level programs also occur at senior

colleges and institutes, which generally have a narrower subject-matter focus

Regarding the development of the number of higher education institutions, in the

period from 2006 up to now, there have been 79 newly established and upgraded higher

education institutions, bringing the total number of higher education institutions in the

current system to 235 Vietnam higher education currently consists of 170 public

universities, 60 private universities and 05 universities with 100% foreign capital,

including 61 pedagogical universities and multi-disciplinary schools with teacher

training

Figure 2.1 Development of Vietnam higher education system

In terms of the network structure by ownership type, although the number of

non-public universities has continuously increased over the years, the role of private

institutions in the development of higher education system is still limited The

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percentage of non-public higher education institutions and 100% foreign-owned

institutions in our country account for a low rate of 27.7% compared to some countries

in Asia such as Malaysia (about 52%), Korea (about 80%)

Figure 2.2 The structure of Vietnam higher education system

In terms of students and majors, for the period 2006-2016, total number of

full-time students in higher education institutions nearly doubled and reached 1,767,879

students in the year 2016-2017 However, the scale of higher education at non-public

universities is 243,975 students, accounting for only 13.87% of total students

nationwide, much lower than the Government’s targets Regarding the structure of

sectors and majors, the percentage of vocational students allocated by 07 sectors is:

science education and teacher training (11%), social sciences and humanities (16%);

transport technology, engineering, construction (32%); Business, Law Management

(30%)

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Figure 2.3 Number of students in the university majors

Regarding quality assurance conditions, some higher education institutions have

made great efforts in expanding campuses, strengthening facilities and equipment, along

with developing managerial staff and lecturers organic A number of Vietnam

universities have been included in the regional university rankings, initially affirming

the university's prestige and brand in training, scientific research and international

cooperation In terms of quality accreditation, up to now, there are 118 higher education

institutions that have met the accreditation standards according to Vietnam’s education

quality testing standards and 4 accredited institutions by international standards,

accounting for 52% of the total number of higher education institutions (GSO, 2018)

2.2 Literature review on rate of return to higher education

The returns to education have becomes relevant issue for developing countries It

has confirmed that better-educated people are receiving higher wages rather than

less-educated people (liệt kê tên các nghiên cứu đề cập tới mệnh đề này) They also have

better occupations and higher status compare to people in low educational achievement

Additionally, the higher educational level attainment of workers might help to develop

new technology in order to increase total factor productivity It is supported by a variety

of related studies as follow:

Comola and Mello (2011) used household survey data in order to estimate the

determinants of incomes in Indonesia The result from their study showed that incomes

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quan đầu tiên em cần tổng quan rate of return to higher education là gì (khái niệm) vì có nhiều quan điểm khác nhau, tiếp theo là tổng quan về các phương pháp đo lường, sau đó tổng quan các nghiên cứu thực nghiệm theo ngành thì kết quả như thế nào Cuối cùng cần có phần nội dung đánh giá tổng quan: Các nghiên cứu đã review cho em khung lý thuyết gì,

nó còn chưa đề cập đến những vấn đề gì: cụ thể em lựa chọn khái niệm rate of return là gì, phương pháp nào em sẽ lựa chọn để ước lượng, và em sẽ ước lượng kết quả gì (mục tiêu)

ở VN

increase regarding to educational attainment and age, and there were differences between men and women salaries It indicated that women are salaried less than men

Moreover, their study in 2010, used household survey data in 2004 to estimate the determinants of earnings in Indonesia The data contains 75.371 households or 237.920 individuals were measured and available only for salaried workers The result indicates that educational achievement seems to be a dominant forecaster of labor-market outcomes The members of better-educated households suggest not to accepting low quality non-salaried works (Comola and Mello, 2011)

Harberger and Guillermo-Peon (2012) did a study on the relationship between education and incomes in Mexico The study compares the benefits of higher education

to lower level education or high school graduated They used data from ENOE, a survey that published quarterly by the National Institute of Statistics and Geography or INEGI

in Mexico for second quarter of 2010 The result showed strong support for net present value and internal rates of return to investment regarding to sequential steps up the educational hierarchy

In addition, Purnastuti (2012) used data from Indonesia Family Live Survey (IFLS) wave IV to estimate the private rates of return to education in Indonesia The study used ordinary least squares and Mincer model The result showed that one year of schooling rises an individual’s wages by 5,66 percent Further, study showed there was

a gender asymmetry in private economics returns to education between men and women

It indicated returns to women’s education being statistically significantly higher than men’s education

Akguc (2010), study on cross-country panel estimations of the returns to the stages

of education in primary, secondary, and tertiary using production function in the Mincer model way in order to achieve log-linear equation The data used dataset on education, output, and capital stock that offered by Cohen and Soto in 2007 The result indicated that the fixed effects estimates income significant and positively retained effects for primary, secondary, and tertiary of schooling on output per worker It also showed that tertiary education tends to be the most dominant type of schooling rather than primary and secondary schooling It supported by significant effect on aggregate wage per capita for the range of 11.2 % to 13.2 %

From empirical result, the education has strong correlation with the educational attainment It is indicated that higher education tends to be the most significant type of education rather than primary and secondary level of education It also showed significant effect on aggregate salary per capita

2.3 Literature review on choice of college major

Concerning the choice of college major, there is a significant amount of empirical evidence suggests that earnings potential affects individuals’ choice of college major (Berger, 1988; Willis and Rosen, 1979; Zarkin, 1985) There is less definitive evidence

on the extent to which lifetime earnings considerations factor into college major choices, though, as suggested above, it is clear that there are significant differences in rates of return according to one’s major (Carnevale et al., 2012), and recessions and economic fluctuations can have significant and persistent effects on new college graduates that depends, in part, on the major with which they enter the labor market (Oreopoulos et al.,

2012)

In addition to that, empirical evidence tends to suggest that the influence of future earnings on college major decisions may be quite small, with the choice of major more driven by the consumption value of different fields (Arcidiacono et.al, 2012; Beffy et.al, 2012; Wiswall and Zafar, 2013), field-specific aptitudes (Arcidiacono et.al, 2012; Stinebrickner, 2014; Freeman and Hirsch, 2008), or the pricing of particular majors (Stange, 2012) The primacy of consumption value appears to hold even in situations where particular majors are known to be strongly linked to certain occupations (Alstadsaeter, 2011)

Work that focuses on connecting field of study to potential future earning generally relies on strong forecasting assumptions Accordingly, Berger (1988) estimates the relationship between a college student’s predicted future earnings and choice between five broad fields of study In models that attempt to correct for self-selection bias, assuming individual ability and cohort affects earnings but not college major, he finds evidence suggesting that students are likely to choose majors that offer greater lifetime earnings streams Similar to Berger, Beffy et al (2012) estimate the relationship between expected earnings and college major across broad fields of study, and they attempt to account for self-selection by exploiting variations in the relative earnings

returns induced by the business cycle They find heterogeneous responses to changes in

anticipated earnings and conclude that the elasticities of major choices are modest and

primarily driven by non-pecuniary factors

Currently, Vietnam higher education system consists of 07 main sectors, which is

a collection of one or some fields of education and training level II in the list of

education and training of the national education system promulgated by the Prime

Minister; and 70 majors, including science education and teacher training, social

sciences and humanities, transportation technology, engineering, construction,

Business, Law and Management, etc (Ministry of Education and Training, 2018)

According to General Statistic Office (2018), university majors can be divided into 24

groups, including: Science education and teacher training; Art; Humanities; Social and

behavioral sciences; Press and information; Business and Management; Law; Human

science; Natural sciences; Math and statistics; Computers and information technology;

Production and processing; Architecture and construction; Agriculture, forestry and

fishery; Veterinary; Health; Hotels, tourism, sports and personal services; Military and

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