(Luận văn) the impact of human capital and social capital on income of university graduate in ho chi minh city

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 H

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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 HUMAN CAPITAL AND SOCIAL CAPITAL ON INCOME

OF UNIVERSITY GRADUATE IN HCM CITY

BY

NGUYỄN LIÊN HỒNG PHÚC

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

HO CHI MINH CITY, JULY 2013

tot nghiep do wn load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg

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UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES

VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS

THE IMPACT OF HUMAN CAPITAL AND SOCIAL CAPITAL ON INCOME

OF UNIVERSITY GRADUATE IN HCM CITY

A thesis submitted in partial fulfilment of the requirements for the degree of

MASTER OF ARTS IN DEVELOPMENT ECONOMICS

By

NGUYỄN LIÊN HỒNG PHÚC

Academic Supervisor:

NGUYỄN VĂN PHƯƠNG

HO CHI MINH CITY, JULY 2013

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Contents

ACKNOWLEDGEMENT iii

ABTRACT iv

CHAPTER 1: INTRODUCTION: 1

1.1 Problem Statement 1

1.2 Research Objective 2

1.3 Research Question 2

1.4 Research Methodology 3

CHAPTER 2: LITERATURE REVIEW 4

2.1 Social capital and status attainment theory 4

2.2 Human capital and status attainment theory 6

2.3 Measurement of human capital 11

2.4 Measurement of social capital 13

2.5 Relationship between human capital and social capital 17

CHAPTER THREE: METHODOLOGY 20

3.1 Introduction 20

3.2 Data collection 20

3.3 The empirical model 21

CHAPTER FOUR: DATA ANALYSIS AND RESULTS 34

4.1 Descriptive Statistics 34

4.2 Modeling Analyses 38

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4.3 Explanation of coefficients 42

4.4 Policy implication 43

CHAPTER 5 CONCLUSIONS AND RECOMMENTDATION 46

REFERENCE 48

Appendix 1: Correlation matrices 59

Appendix 2: Heteroskedasticity Test: (Breusch-Pagan-Godfrey) 60

Appendix 3: Normality Test 61

Appendix 4: Regression result 62

Appendix 5: Regression result of continuous dependent variable 63

Appendix 6: KMO and Bartlett's Test (Social capital) 64

Appendix 7: Anti-image Matrices 65

Appendix 8: Extracting the Factors 67

Appendix 9: Giving the factors meaning 68

Appendix 10: Obtaining the factor score coefficient matrix 69

Appendix 11: Obtaining standardized scores 70

Appendix 12: Regression result (CFA method for social capital) 71

Appendix 13: QUESTIONAIRS 72

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ACKNOWLEDGEMENT

First and foremost, I would like to thank my academic supervisor Dr Nguyễn Văn Phương at Vietnam National University HCMC International University for the support, the ideas and constructive comments that helped me a lot to

successfully finish this master thesis I also would like to thank Dr Phạm Khánh

Nam and Dr Nguyễn Hữu Dũng for supporting during Thesis Research Design

and encouragement I also am deeply grateful to my family for their love,

support, encouragement and trust in me during the time of thesis processing

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ABTRACT

My study investigates the effects of human capital and social capital on income

of university’s graduate in Ho Chi Minh City Human capital is captured by English proficiency, computer skills, and communication skills Social capital is categorized by home-based capital, friend connection, extracurricular activities, peer relationship, teacher-student relationship, and university impact My study employs the data through the own survey in 2012 The empirical results are as follow: i) The English proficiency and communication skills have the significant impact on income of university’s graduate ii) The parent education and teacher-student relationship also have the significant positive effect on income of university graduate The message from my study can give to students, educators, and educational policy makers about the effect of social capital, and human capital on income

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CHAPTER 1: INTRODUCTION:

1.1 Problem Statement

There are many studies about human capital and social capital alone on different status attainments such as economics, education, environmental, and many other things with different levels of impact on individual, firm, organization, and society instead of the combination between them Many researchers argue that the relationship between human capital and social capital are substitution (Piazza-Georgi 2002) The other side argues that it has the complementary relationship (Bruderl and Preisendorfer 1998)

In the current market economy in Vietnam, education is the driven factor to increase knowledge and competency Human capital is the key factor to increase value such as wages, competencies, and productivity not only for individual but also for firm and society as a whole (Denison, 1962; Schultz, 1961) The study of Grayson in 2004 found that human capital had the positive contribution to income of university graduate in Canada Government has recently attracted many multi-nation companies to invest in Vietnam so the demand of economy is increasing the demand for employee with a certain form human capital to meet the requirements of the competitive business environment 'The knowledge, skills and competencies and other attributes embodied in individuals that are relevant to economic activity' is the definition of human capital (OECD, 1998)

With the context of my study, the human capital is captured by English proficiency, computer skills, and communication skills (Santarelli and Hien, 2012)

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On the other hand, many studies investigate the effect of social capital on the many desirable outcomes of individual, household, and firm level The study of Yandan Wang examined the effect of social capital on job outcome of university graduate by using the NELS – National Education Longitudinal Study in 2008

The study emphasized how importance of the university environment to build up the social capital that had the positive relationship with job outcome for university graduates The study carried out by Nguyen Van Ha to see the impact

of social capital on the household welfare in paper-recycling craft village in Vietnam in 2004 The other study of Ha Anh Tuan carried out to examine the impact of social capital on individual income in Ho Chi Minh City We rarely see many researches to combine the human capital and social capital impact on one desirable outcome, especially for the level of individual

1.3 Research Question

The major relationships investigated in this study are:

Research question 1: Does the investment of individual for the human capital bring the positive relationship to income?

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Research question 2: Does the current social capital and cumulative social capital during university period have the positive impact on income of university graduate in Ho Chi Minh City?

1.4 Research Methodology

My study uses the survey data of university graduate in Ho Chi Minh City with the samples size is 252 The combinations of three method of survey are face-to-face interview, drop off, and email The econometric method employed is OLS

(Ordinary Least Square) with robust standard errors

The major independent variables in the proposed model are cumulative social capital during university (extra-curricular activity, voluntary service work, and social connection), current social capital, and Home base social capital represented by Social Economic Status (parent education level); Human capitals which measured by English skills, communication skills, and computer skills

The result of this study aims many readers First, student can use this as a preference for good preparation for the transition period Second, educators and educational policy makers can use this to have the good design program for student during university to achieve the desirable human and social capital

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CHAPTER 2: LITERATURE REVIEW

Before carrying out the study, we have to know that what the definition of social capital, human capital is How is the relationship between human capital and social capital? What is the theory behind that? In particularly, we have to answer the question what the definition of social capital and human capital is in the

context of this study, and how we can measure it

2.1 Social capital and status attainment theory

Bourdieu (1986) defines social capital as “the aggregate of the actual or potential resources which are linked to possessions of a durable network of more or less institutionalized relationships of mutual acquaintance and recognition.” He focused on the social capital with relationships such as family, schooling, and workplace environment He states that social capital involves “transforming contingent relations, such as those of neighborhood, the workplace, or even kinship, into relationships that are at once necessary and elective, implying durable obligations subjectively felt (feelings of gratitude, respect, friendship, etc.)” (1983)

Three form of social capital are obligations and expectations, relational networks, and social trust and norms (Coleman, 1990) The social capital can help individual to obtain their objective and mission through the social relationship and network of social tie The study of Coleman, which carried out in 1988 to examined the relationship between the social capital and education achievement

by using the series of National Educational Longitudinal Study He refers social capital to social relationships that can help individual to accomplish a task or

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achieve a goal Social capital can contribute and promote the learning of individual and adapt to society and its norms.

Putman (2000) defines social capital “While physical capital refers to physical objects and human capital refers to properties of individuals, social capital refers

to connections among individuals - social networks and the norms of reciprocity and trustworthiness that arise from them” According to Putman, There are two type of social capital First, bonding social capital refers to inward relationship such as within family, group of friend, or ethnic group Second, Bridging social capital relates to outward relationship among different groups

Most of the studies have focused on how human capital impact on the job attaining process Because the status attainment theory believes that, the education achievement such as knowledge and skills is the core factors to have the competitive advantage to obtain and get a better job (Becker, 1975; Mincer, 1974)

Status attainment theory states that the level of education achieved of one person affected by social status of parent According to Featherman & Carter (1976) and Jencks (1979), the status attainment theory has a high correlation with parent's occupations, levels of education, and incomes The level of education in turn affects the occupation status and income of children

There are not many researches and literature mention about the effect of cumulative social capital during university period to income The connection, extra-curricular activity, and other activity that created during university period play an important role in occupational status of individual The social capital that created during university might affect occupation of individual in many ways

Student might get the first job through connection or university network, and this

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job may be a direction for occupation career of individual, which might directly affect income On the other side, the argument of Buerkle and Guseva (2002) said that the cumulated social capital during university had independent effect on income of individual

Buerkle and Guseva (2002) states that the social capital gained in the university has the effect on individual’s income, and this effect varies by individual’s education and experience levels The reason that social capital in university is of special interest for occupational success is that it is closely tailored to the student’s career interests and aspirations Conceptualizing the university experience is an important source of social capital

Lin (1999) carried out the research to examine the relationship between social capital and status attainment The research had two processes The first process focused on how people access to social capital available in a general social networks, such as a person’s education background, prior experiences The second process involved the use of social contact and resources provided by the contact in the job-search process such as network resources, education, and initial position These factors expected to affect attained status like occupational status, earnings …

2.2 Human capital and status attainment theory

With the challenges of the current knowledge economy, many countries in general and individual always want to seek the new way to improve and maintain competitive advantages In the context of Viet Nam, the success of individual largely depends on level of competencies In the end, people are becoming

valuable assets and recognized within a framework of human capital

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Generally, the human capital is the combination of two words with different meaning In the economic perspective, the human is the subject to take charge of all economic activities such as production, consumption, and transaction The capital refers to ‘factors of production used to create goods or services that are not themselves significantly consumed in the production process’ (Boldizzoni, 2008) On the creation of these concepts, human capital means one of production elements, which can generate benefits through inputting it

There are many studies show that human capital influences many desirable outcomes Many economists show that investment in human capital brings the high individual’s wage compared with other input such as land, labor force, and financial capital (Salamon, 1991) The investment of the knowledge and skills of individual is easy to turn into goods and services (Romer, 1990) Human capital, such as knowledge and skills, which can improved through learning process

According to Sleezer, Conti, and Nolan (2003), learning is the key factor and important component to acquire human capital and enhance the relationship with other through learning process.In the micro perspective, human capital is the key factor for firm’s competence and comparative advantage (Lepak & Snell (1999)

In the macro perspective, Dension (1962) and Schultz (1961) say that human capital largely affects wage of individual, productivity of firm, and the economy

of nation Schultz (1961) stated that human capital plays an important role in the growth of an economy

Investment of human capital is not only productivity alone but also other thing

Attaining learning activity, the learner is easily to apply for the job-seeking activity After employed, people are also easily control and organize their job activity, workplace, and quick adaptation of working condition to receive high reward from current firm and labor market

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We can understand that knowledge and skills are the concept of human capital that can acquire through the learning activity Skills, knowledge, competencies, and experience can consider as the factor of human capital

The first point of view of human capital is from individual aspect, human capital

is a property against labor force in the classical aspect (Schultz, 1961)

Researchers show that the human capital can closely link to knowledge, skills, education, and abilities (Garavan, 2001; Youndt, 2004) Human capital is conceptualized ‘knowledge, competency, attitude and behavior embedded in an individual’ Rastogi (2002)

The second point of view of human capital is the accumulative process that people obtain the knowledge and skill throughout the learning activity such as university, college, vocational education (Alan, 2008) In the other way of saying, human capital acquires knowledge and skills through experience

The third point of view of human capital is the production-oriented perspective

The definition of human capital is “an amalgam of factors such as education, experience, training, intelligence, energy, work habits, trustworthiness, and initiative that affect the value of a worker's marginal product” (Frank and Bemanke 2007) The definition of Romer (1990) is “a fundamental source of economic productivity’ The definition of OECD (2001) human capital is ‘the knowledge, skills, competencies and attributes in individuals that facilitate the creation of personal, social and economic well-being”

Definition from OECD (1998), Human capital defines as 'the knowledge, skills and competencies and other attributes embodied in individuals that are relevant

to economic activity' The job market has the demand that university graduate for many skills In the knowledge economy, the increasing demand for highly

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educated with communication, self-management, adaptation skills,… and especially English skills, computer skills, and communication skills in the context of Vietnam where is the interest destination for multinational companies are the core factors

The research of Becker in 1975 and Mincer 1974 give a high attention to how important of human capital, knowledge and skills, affect the job obtaining process base on the theory of status attainment to get a better job in the job market According to Featherman & Carter (1976) and Jencks (1979), “the status attainment specially acknowledges that the job status of a person is a function of skills and knowledge of individual, parent education, education attainment of individual income, and occupation of parent”

Since the late 1970s, there are many research diagnose the relationship between income and language proficiency Most of studies carried out in developed countries where the destination of immigrants is Chiswick and Miller (1995, 2002), Bellante and Kogut (1998) examine the relationship of English proficiency of immigrants and income in United State The same study carried out in United Kingdom by Shields and Wheatley Price (2002) We can see that most of study has just focused on the fluency of destination language on earning

of immigrant

In the context of developing country where does not the destination of immigrants The native language is very diversification and it cannot conduct for the business language The earning of indigenous population cannot evaluate by the fluency of native language but dominant language in business especially English proficiency Research explore in developing country is the relationship

of dominant language in business and income among indigenous population

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According to Chiswick and Miller (1995), Language proficiency is an important factor of human capital It increases the productivity of a person through reduce transaction cost and exchange information effectively among individual

Dustmann, (1994) and Shields and Wheatley Price (2002) argue that it help individual to have a better negotiation with employer to have better earning As mention above, Most of studies evaluate the effect of destination language on income of immigrants In the context of my study, language proficiency defines

as the proficiency of English, which is the most popular business language

According to Chiswick and Miller (2002), International transferability is the return of language proficiency in education of immigrants In their study, language proficiency is the key factor and has the positive relationship to the year of schooling in United State among immigrants We can say that language is the complementary with other type of human capital According to MOLISA (Ministry of Labor, Invalids and Social Affairs - MOLISA) of Vietnam by 1996, there were around 85% of student in Vietnam graduated with language skills at difference levels and around 30% of them using these skills at work

Computer skills are another form of human capital There were around 40% of students graduated with computer skills at different levels and 18% of them using these skills at work, according to the report of MOLISA of Vietnam by

1996 With the current opening economy, Vietnamese government has a good policy to attract foreign direct investment The computer skills and language skill

is the key competitive factor to obtain the job and better earning These skills also expect to increase together with FDI investment

The research of Krueger (1993) showed that the income of worker with computer skills was around 10-15% higher compare with worker without computer skills

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He explained that the earning gap was due to computer skills On the other hand, the reverse result of several studies, for example, the study of Sakellariou and Patrinos carried out in 2004 in Vietnam show that computer skills has no change for earning of individual The similar finding found in United State by Handel (1999), Krashinsky (2000), and in United Kingdom by Borghans and Ter-Weel (2001)

Borghans (2003) analyzed the returns to various types of skills in Britain and found that while the ability to write documents and carry out mathematical analyses yields significant labor market returns The ability to use a computer has no substantial impact on wages, despite the higher average earnings of workers who use computers at work, compared to those who do not

2.3 Measurement of human capital

The measurement of human capital has categorized into three ways: Income approach, output approach, and cost approach Income approach is the wage or benefit of individual obtained by education or training investment Output approach is something such as level of knowledge obtaining, the year of schooling The Cost approach prefer to the cost paid for getting knowledge or certificate

Income approach is the returns, income or benefit, which an individual obtains

from labor market through education investment Mulligan & Sala-i-Martin (1995) defines that aggregate human capital is the sum of quality adjustment of each individual’s labor force, and presents the stock of human capital utilizing an individual’s income

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Output approach can be measured the human capital by “schooling enrollment

rate”, education attainment, or the production output Psacharopoulos (1984) suggested the average years of schooling to measure the stock of human capital

They refer that the average years of schooling is meaningful to measure the stock

of human capital as a proxy Barro (1991) and Barro and Lee (1993) measure the stock of human capital utilizing ‘school enrollment rates’ as a proxy of human capital Nehru, Swanson, & Dubey (1993) measure relationship between human capital and students’ ‘accumulated years of schooling’ in the employable age as educational attainment

Cost approach is the accumulated cost to investing for one’s human capital

Jorgenson & Fraumeni (1989) present the discounted income in the future The stock of human capital uses indirectly to measure for this approach The investment cost of individual uses to measure in the study of Kendric in 1976

Chiswick and Miller (1995) utilize Language proficiency is the important factor

of human capital In Vietnam, the current open economy where the destination of many multinational companies is, English skills widely believe that is the important factors in the competitive labor market for university graduate There

is almost no empirical research on the returns of earning with different levels of English skill in Vietnam and relationship with other educational outcome as well

as social capital

The research of Casale and Posel (2010) found that the large return among Africans who English skills are good The English skills use in the research is reading and writing skills Their research uses the NISD database (National Income Dynamics Survey) The survey conducted in 2008 The question is how

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well they could speak and write English together with indigenous language The answer ranged into 4 scales “very well”, “fair”, “not well” and “not at all”

Computer skill is another form of human capital According to the study of Sakellariou and Patrinos (2004) in Vietnam, the earning of individual with computer skills is 10-14% higher than individual who do not Sakellariou and Patrinos confirmed again this with the later study The study used the instrumental variable approach The university graduate was asked to measure their computer skill It ranged into four scales (low, intermediate, high and very high) In the other research of Choi (1993) in Korea, The earning of worker was higher with computer skills in the industries with rapid change in technology than industries with slow change in technology The study of Sakellariou and Patrinos (2004) showed that there was a positive relationship between education outcome and computer skills in Singapore

2.4 Measurement of social capital

Home based social capital

Social Economic Status:

The accumulation process of social capital believed that when students and parents engage in day-to-day educational activities, and as parents provide resources for better educational development Parents also bring resources for the overall development of their children

Socioeconomic status (SES) is an economic and sociological combined total measure of a person's work experience and of an individual's or family’s economic and social position in relation to others, based on income, education,

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and occupation In the context of this study, parent’s education is as a form of social capital that affects to children education outcome measured by earning

Parent with good and high education will give more support and involvement to children education activity Parents who are more involvement and support of their children are likely to build up social capital within the family (Coleman, 1988) This type of social capital provides young students with the resources that may have an impact on students’ behavior at university attainment and university performances Coleman (1988) viewed social capital as the outcome of relationships between parents and children

Crosnoe (2004) found that emotionally distant relationships with parents were associated with declining academic achievement Some studies also examined the relationship between social capital within family and years of schooling

Some earlier studies have found a positive relationship between socioeconomic status of family and education result of the children

Social Capital in College

Extra-curricular activities:

Extra-curricular activities are activities performed by students that fall outside the realm of the normal curriculum of school education Such activities are generally voluntary as opposed to mandatory, tend to be athletics, social and philanthropic as opposed to scholastic, and usually involve others of the same age (Robert S Rubin, 2003) Another way of saying, on university campuses, extra-curricular involvement is a key tool in personal development The majority

of university students, involvement in extra-curricular activities, play an integral role in the college experience “Students involve in extra-curricular activities is not only for entertainment, social, and enjoyment purposes, but most important,

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gain and improve skills”

Activities.html) These activities create environment for student to meet and interact with other people beside their friends This might help them to expand their social network and diversify their relationship Students can learn and exchange information effectively beside what they learn in the classroom

(http://education.stateuniversity.com/pages/1855/College-Extracurricular-Extracurricular activity is the good way for the student to develop relationship with other people with different backgrounds and different characteristics, which

is the important part of social capital Besides that, it also help student improve the skill how to work together That will lead to better learning outcome and job outcome later on Brehm & Rahn (1997) said that Extra-curricular activities is

“web of cooperative relationships between citizens”

In my study, participation in extracurricular activities help individual enhances the social network and relationship in both university and communities So it can

be considering as a factor of social capital For example, through participating English club student not only improve their English skill but also make friend with many people with many different backgrounds

There are many studies demonstrated a linkage between student’s participation in extra-curricular activities and their academic proficiency and other outcomes In

a study of students’ extra-curricular involvement, Rombokas (1995) have examined if the degree of participation in extracurricular activities affected college academic performance and have found the positive relationship with job outcome Guest and Schneider (2003) found that involvement in extracurricular activities, such as sports Eccles (2003) pays attention to the influence of extra-curricular activity on issues such as academic achievement, personality and social behavior

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Peer relationship:

There are some studies show that peer relationships play an important role in the development of student’s social behavior and school performance Peer relationships in school have studied by many researches Nichol & White (2001) found that peer relationship was an important factor affect to student’s development The empirical study of Berndt & Keefe (1995) and Wentzel &

Caldwell (1997) showed that the positive relationship between academic accomplishments and having a friend Friendship has strong impact on student’s general levels of involvement in school and time spent on academic pursuit (Berndt & Keefe, 1995) The supportive evidence for the positive influence for academic achievement of algebra and student peer group (Nichols and White, 2001) Nichols and White (2001) pointed out that it needs to understand peer group context as an important factor in student’s social behavior and academic performance In sum, these various studies have supported that peer relationships can be an important social resource for students A good peer relationship can motivate and encourage students to be more engaged in positive behaviors Peer relationship is considering as a source of social capital During university time, students spend most of their time with peers It is not surprising that peers have the important role of student’s lives and influence each other’s behavior and opinion The influence of peers is of critical importance in their life and the opinions of peers sometimes can even carry more weight than parents’ opinions

Teacher and student relationship

The teacher – student relationship considers as another form of social capital

This relationship has the effect to many outcome of student

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There are many factors affect to teacher – student relationship such as student demographic variables, academic orientations, and behavioral orientations (Murray and Greenberg, 2000) The author found that above variables have the significant effects to teacher – student relationship Birch & Ladd (1997) found that individual student characteristics, behaviors and academic performance also affect to teacher –student relationship With the logical thinking, positive relationship between teacher and student can bring to positive academic performance for student Student feels more comfortable and easy to talk to teacher with challenges and improve learning such as asking questions in class and persisting with solving difficult matters in learning The study of Birch &

Ladd also showed that student worked hard with the close concern from teacher that would lead to better academic performance More specifically, students who come to school with poor social skills would benefit more from more personal teacher - student relationships

2.5 Relationship between human capital and social capital

Regarding the relationship between social capital and human capital, Coleman (1998) emphasizes the role of social capital in the creation of human capital In contrast, other researchers argue the causal chain should be reversed, for instance, social capital can be an unintended by-product of the constitution of the human capital (Buerkle & Guseva, 2002)

Many authors have studied the effects of human capital and social capital on various outcomes, usually focusing on either human capital alone (Cooper, 1994;

Van Praag and Cramer, 2001) or social capital alone (Yoon, 1991; Bates, 1994;

Pennings, 1998) rather than their combination Some scholars argue that they are substitutes, and others see them as complements It is hard for individual to

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invest in both human capital and social capital at the same time According to Bruderl and Preisendorfer (1998), “social capital compensates for shortcomings

in human capital” Otherwise, Piazza-Georgi (2002) states that “investment in human capital leads to a loss in social capital”

The study of Knack and Keefer (1997) showed that the social capital brings higher returns to society than human capital One of the main drivers of economic growth is the interaction between human capital and human capital (Barro and Sala-i-Martin, 1995)

The study of Pennings in 1998 found that the human capital and social capital strongly predicts the failure of accounting firm in Dutch The potentials’ ties to potential clients represented for social capital Human capital represented by industry experience of firm, education level, and firm tenure

For individual, the study of Davidsson and Honig in 2003 found that the opportunity discovery and exploitation is the result of the effect of human capital and social capital Their study used the longitudinal data for Swedish There are two findings in their study (i) The success of exploitation highly associated with social capital, and (ii) Entrepreneurial discovery is strongly predicted by human capital

Investment in human capital and social capital improve the firm’s performance

in Dutch (Bosma and Van Praag; 2004) The firm’s performance captured by profits, survival, and generated employment Their study uses the data from Dutch entrepreneurs

Coleman (1988) states that human capital and social capital has the complementary relationship The social capital in community and family can

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help individual promote human capital “Social capital is the contextual complement to human capital’’ (Burt; 2001) On the other hand, other researchers state that human capital and social capital has the substitution effect such as Bruderl & Preisendorfer (1998) and Piazza- Georgi (2002)

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CHAPTER THREE: METHODOLOGY 3.1 Introduction

The purpose of my study examines the relationships among various variables of university graduate such as accumulative social capital, human capital and job outcome which measured by income, developed from research literature The most important relationship in the proposed model is: 1) Human capital such as 1.1) English proficiency, 1.2) Computer skills, 1.3) Communication skills 2) Social capital such as 2.1) Social Economic Status, 2.2) Friend connection, 2.3) Extra-curricular activity at university, 2.4) Peer relationship, 2.5) Teacher and student relationship, and 2.6) the university impact This chapter presents the research methodology for the study This chapter also describes the data sources, sample and the models The chapter starts with a description data collection, and then continues with explanation of the instrumentation, model and measures, measurement model, hypotheses and the procedures that used to test the model

3.2 Data collection

The data is collected by using the personal network which the set of constructed questionnaires The survey has done with Vietnamese questionnaires with three ways of survey: 1) First, face to face format with accounted for 10% of the sample, 2) Second, 40% of sample size carried out through email, 3) Third, the rest of 50% did by drop off survey Out of 290 questionnaires that are administered, 252 met the requirement that within three year of graduation

The questionnaire has three sections The first section records general information of individual The second section deals with human capital, and it

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includes questions regarding the learning outcome of individual such as English proficiency, computer skills, and communication skills The final section includes questions to measure social capital such as social economic status, friend connection, and accumulative social capital at university such as extra – curricular activity, peer relationship, teacher and student relationship, and the university impact to individual

3.3 The empirical model

To capture the causal effect of human capital and social capital variables on the outcome of individual that income or wage in survey used as the dependent variable OLS with robust standard errors uses to estimate this relationship

Human capital determinants include English proficiency, computer skills, and communication skills Researchers claim that bias is likely to occur if OLS adopted This is because there may be unobserved individual characteristics, such as ability and motivation, that affect the schooling level attained and the subsequent learning outcome However, most empirical research studies the effect of endogenous education in wage/income equations, in which different educational level or number of schooling years taken as the main input to explain individual return in terms of wages and incomes In such cases, important unobservable factors such as ability and motivation will bias the estimation and give misleading results In my study, the effects of learning outcome of individual achieved which I expect to exhibit a positive relationship with income

or wage of individual, under the assumption that other control variables to account for different individual characteristics may offset the endogenous educational bias

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Figure one show the simplified general model, which tested in this research A general model can help us has better understand the ways in which social capital and human capital affects the income An extension of this model, which includes the possibilities that factors human capital and social capital, could eventually have an effect on income The human capital constructing in the model are English proficiency, computer skills, and communication skills The social capital constructs in model is social economic status, friend connection, and accumulative social capital at university: extra – curricular activity, peer relationship, teacher and student relationship, and the university impact on income of individual

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Figure 1: General model

Human Capital

English proficiency

Computer skill

Communication skill

Social Capital

Home based capital

Extra – curricular activity

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Human capital is the accumulative process that people obtain the knowledge and skill throughout the learning activity such as university, college, vocational education (Alan, 2008) English proficiency, computer skills, and communication skills evaluated through asking individual The answer has five options and coded from 1 to 5 where 1 means beginning level or and 5 means excellent level in term of meeting the job requirement

Social capital measures as home based capital, friend connection, and accumulative social capital at university such as extra – curricular activity, peer relationship, teacher and student relationship, and the university impact to individual

Home based capital measures by economic status (SES): The economic status measures by education levels of parent The question uses to measure this is “Year of schooling of parent” The answer ranged from 1 to 5 where 5 means above university level, 4, 3, 2, and 1 means university level, vocational and college level, high school level, and other, which means below high school level

socio-Friend connection presents by the number of friends which individual believe that friends can give the support during difficult time The question is “How many friend do you think they will have you when you meet difficulty” The answer ranges from 1 to 5 together with only 1, 2, 3, 4 friends and 5 and above

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Figure 2: Measurement of Friend connection

Extracurricular activities: These extracurricular activities include attending sports, music club, joining the green summer volunteer campaign, English clubs… The question is “How often did you attaint these activities at university?”

The respond option has ranged from 5 to 1 where 5 are always and the frequency gradually reduces to 1, which means never

Figure 3: Measurement of Extra-curricular activity

Peer relationship: Peer relationship in university which measured by the following questions: “Choose the answer that is best for you.” 1) Among friends, how important to get good grades; 2) Among your friends, how important of playing sport; 3) Among friends, how important to get together with friend The

Participation in Extracurricular activity

Participation in community volunteer work

Extra – curricular activity

Friend connection Number of friend

Time for those relationships tot nghiep do wn load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg

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answer has 5 options ranged from 5 to 1where 5 is very the most important and 1

is not important at all

Figure 4: Measurement of Peer relationship

Teacher and student relationship: Teacher-student relationship in university measures by the following questions: “How much do you agree with each of the following statements about your school and teachers?” 1) Teachers are interested

in students; 2) Students are graded fairly in school, 3) There is cheating in school;

4) Teachers ignore cheating The answer has five options ranged from 1 meaning not agree at all to 5 indicating strongly agree

Impt to have good grade

Impt to play sport

Peer relationship

Impt to get together tot nghiep do wn load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg

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Figure 5: Measurement of Teacher student relationship

The impact of university on job outcome: It represented by for variables on this factor Individual asked whether university education has positive impact on the performance at work 1) Do you think your study at university would bring you a better job? 2) Do you think your study at university would bring you higher salary? 3) Do you think your study at university would bring you higher responsibility? 4) Do you think your study at university would bring you a better opportunity to get promotion? The answer has five option and ranged from 1 meaning not agree at all to 5 indicating strongly agree

Teacher and student relationship

Teachers are interested in students

Students are graded fairly

There is cheating

in college

Teachers ignore cheating tot nghiep do wn load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg

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Figure 6: Measurement of University impact

Job outcome measures by income The question is “how much do you earn a month with your main job?” Responses are reverse coded, with 1 meaning the earning is less than 4 million VND, 2 meaning the earning from 4 to 5.6 million VND, 3 meaning from 5.6 to 7.2 million VND, 4 and 5 meaning from 7.2 – 8.8 million VND and above 8.8 million VND

The model of Grootaert (1999), Grootaert and Narayan (1999), and Grootaertand Swamy (2002) used human capital and social capital as the input of private good and income as outcome of model In my study, I employ the same model as below

Y = f (H, S, C) (1)

University impact

Impact better jobs

Impact higher salary

Impact more responsibility

Impact promotion tot nghiep do wn load thyj uyi pl aluan van full moi nhat z z vbhtj mk gmail.com Luan van retey thac si cdeg jg hg

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Where Y is income or wage H is human capital S is social capital C is characteristic of individual

From the function (1), it can be made model specification by the regression econometric model with ordinary least square technique

Y = β0 + β1Eng + β2Comp + β3ComSki + β4PareEdu + β5Frie + β6FrieMeet +

β7ECA1 + β8ECA2 + β9PeerEdu + β10PeerPopu1 + β11Peerpopu2 +

β12TeachStu1 + β13TeachStu2 + β14TeachStu3 + β14TeachStu4 + β15ImpStu1 + β16ImpStu2 + β17ImpStu3 + β18ImpStu4 + ei

Where: Y – Income: Monthly income or wage in VND

Eng - English proficiency

Comp – Computer skill

PareEdu– Parent’s education

Frie – Number of friend

FrieMeet – Friend meeting

ECA – Extra-curricular activity

PeerPopu - Peer relationship

TeachStu - Teacher and student relationship

ImpStu - Important of study

Definition of independent variable:

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Dependent variable Y - Income: This is the amount that an individual get a month from their main job It measures by millions of VND Responses are reverse coded, with 1 meaning the earning is less than 4 million VND, 2 meaning the earning from 4 to 5.6 million VND, 3 meaning from 5.6 to 7.2 million VND,

4 and 5 meaning from 7.2 – 8.8 million VND and above 8.8 million VND

Independent variables – human capital:

English proficiency (Eng) is the level of English skill, which can meet the job requirement The responder is asked, “What is your English proficiency to meet your job requirement?” The answer will be coded from 1 to 5 which 5 is excellent level, 4, 3, 2, 1 are consistent with good, intermediate, between intermediate and beginning level, and beginning level

Computer skills (Comp) are also the level of computer skills, which meets the job requirement The question is “what is your computer skill in term of job requirement?” The respond has 5 options which 5 is excellent level, 4, 3, 2, 1 are with good, intermediate, between intermediate and beginning level, and beginning level

Communication skills (ComuSki): The responders are asked to self-evaluate their communication skills The answer also have five option from 1 to 5 which 5

is excellent level, 4, 3, 2, 1 are with good, intermediate, between intermediate and beginning level, and beginning level

Social capital:

Home based capital measures by the education level of parent (PareEdu) The question is “what is the level of education level of your parent?” Either father mother We have 5 levels for responders which 5 for above university level and 4,

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3, 2, 1 associate with university, college and vocational, high school, and other level

Friend connection measures by two variables The first variable is the number of friend (Frie) that can have you when you meet difficulty The question is “How many friends do you think that can helping you when you meet difficulty The answer has 5 options from 1 to 5, which associated 1 to 5 friends, and above The second variable (FrieMeet) is time for those relationships The question is “how often do you meet your friend a month?” The answer ranges from 1 presenting for 1 time to 5 presenting for 5 times and above

Extra – curricular activity represents by two variables The first variable is the level of participation in extra – curricular activity (ECA1) during university period The second variable is the level of participation of community volunteer work (ECA2) The answer ranges into 5 levels which 5 is always and the frequency gradually reduces to 1 which meant never

Peer relationship: There are three variables to measure the perception of individual during university period The first variable (PeerEdu) is measured the perception of individual in term of learning by the question “Among friends, how important to have a good grade?” The second (PeerPopu1) and the third variable (PeerPopu2) measure the perception of individual in term of popularity

by the question “Among friends, how important to play sport?” and “Among friends, how important to get together with friend?” The answer has 5 levels which 5 is very the most important and 1 is not important at all

Teacher and student relationship represents by 4 variables during university period The first variable (TeachStu1) represents by the question “Teachers are interested in students.” The other three variables (TeachStu2, TeachStu3,

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TeachStu4) are represented by questions “Students were graded fairly”, “Were students cheating in university”, and “Did teachers ignore cheating” The answer has five options and ranged from 1 meaning not agree at all to 5 indicating strongly agree

University impact is to ask perception of individual whether the university result impact to their current outcome The question “Do you think your study at university will bring you a better job?” is to measure the first variable (ImpStu1)

The other three variables (ImpStu2, ImpStu3, and ImpStu4) are represented by four question “Do you think your study at university will bring you higher salary?”, “Do you think your study at university will bring you higher responsibility?”, and “Do you think your study at university will bring you a better opportunity to get promotion?” The answer has five options and range from 1 meaning not agree at all to 5 indicating strongly agree

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Table 1: Transforming concept of variables

Classification Concept Variable State of

variable

Expected sign

HUMAN CAPITAL

English proficiency English proficiency (Eng) Quantitative + Communication

skill Communication skill (ComuSki) Qualitative + Computer skill Computer skill (Comp) Quantitative +

SOCIAL CAPITAL

Home base social capital Parent education (PareEdu) Quantitative +

Participation in Extracurricular activity (ECA1) Quantitative + Participation in community

volunteer work (ECA2) Quantitative +

Peer relationship

Among friends, how impt

to have good grade (PeerEdu) Quantitative + How impt to play sport

(PeerPopu1) Quantitative + How impt to get together

with friend (PeerPopu2) Quantitative +

Teacher and Student relationship

Teachers are interested in students (TeachStu1) Quantitative + Students are graded fairly

(TeachStu2) Quantitative + There is cheating in college

(TeachStu3) Quantitative + Some teachers ignore cheating

(TeachStu4) Quantitative + College impact Impact better jobs (ImpStu1) Quantitative + Impact higher salary (ImpStu2) Quantitative +

Impact more responsibility

Impact promotion (ImpStu4) Quantitative +

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CHAPTER FOUR: DATA ANALYSIS AND RESULTS

This chapter divides into 4 sections In the first section, the descriptive statistics for each variable and the correlation among them outlined In the second section, modeling analysis is presented The third section presents the explanation of coefficient, and the final section presents the policy implication

4.1 Descriptive Statistics

Table 1 displays the descriptive statistics for each variable in the proposed model

Here, I describe the dependent variable as well as the key independent variables

These descriptive statistics have reflected the key characteristics of the sampled population

Tiêu đề	The Impact of Human Capital and Social Capital on Income of University Graduate in Ho Chi Minh City
Tác giả	Nguyễn Liên Hồng Phúc
Người hướng dẫn	Nguyễn Văn Phương
Trường học	University of Economics, Institute of Social Studies
Chuyên ngành	Development Economics
Thể loại	Thesis
Năm xuất bản	2013
Thành phố	Ho Chi Minh City

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Số trang	80
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