Determinants of households expenditure on english language education, the case of ho chi minh city

As a result, the current payment for English education of household in Ho Chi Minh City plays an important role in total expenditure for education.. The study also found that total incom

UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES

VIETNAM – THE NETHERLANDS PROGRAMME FOR M.A IN

Academic Supervisor

Dr PHAM KHANH NAM

HO CHI MINH CITY, 2013

I thank so much for all lecturers because of their valuable supports as well as all myfamily, my friends because of their helps and encouragements during my study.

One again, I am grateful to all of you Thank you very much!

LUU THI KIEU OANH

This study attempts to investigate household’s expenditure on English education forprimary school children using the surveyed data from 267 randomly collected households

in Ho Chi Minh City As a result, the current payment for English education of household

in Ho Chi Minh City plays an important role in total expenditure for education It takes up61.4% of basic education in average Compared with household’s total income and totalexpenditure, it makes up 4.7% and 6.7% of total income and total expenditure,respectively The study also found that total income, total expenditure, current payment forextra education, education level of wife and household own a house has a positiverelationship with English education expenditure

Keywords: English education, expenditure, income

TABLE OF CONTENTS

CERTIFICATION i

ACKNOWLEGMENTS ii

ABSTRACT iii

LIST OF FIGURES vi

LIST OF TABLES vii

ABBREVIATIONS viii

CHAPTER 1: INTRODUCTION 1

1.1 Problem Statements 1

1.2 Research Objectives 2

1.3 Research Questions 3

1.4 Research methodology 3

1.5 The structure of the study 3

CHAPTER 2: LITERATURE REVIEW 5

2.1 Theoretical literature 5

Theory of Education expenditure: Education production function 5

Theory of household production function 6

Theory of income elasticity of educational expenditure: 6

2.2 Empirical literature 7

2.3 Conceptual framework 13

CHAPTER 3: RESEARCH METHODOLOGY 15

3.1 Sampling strategy and data collection 15

3.2 Variables’ measurement and explanation 15

3.3 Model specification 23

CHAPTER 4: EMPIRICAL ANALYSIS RESULTS 28

4.1 General information of the Household’s characteristic in HCM City 28

4.2 General information of English education in Vietnam 29

4.3 Importance of English expenditure in household’s decision 31

4.4 Empirical analysis results 32

4.4.1 Descriptive statistics 32

4.4.2 Regression results 40

CHAPTER 5: CONCLUSIONS, RECOMMENDATIONS AND LIMITATIONS 46

5.1 Conclusions and recommendations 46

5.1.1 Conclusion 46

5.1.2 Recommendations 46

5.2 Limitations 47

REFERENCES 49

APPENDIX 52

LIST OF TABLES

Table 3.1 Variable description and expected sign for Model 1 26Table 4.1 The development of number of foreign language center through the years 31Table 4.2 Summary statistic of variables 37Table 4.3 The relationship of total income and current payment for English education 39Table 4.4 The relationship of household’s total expenditure and current payment for

English education 39Table 4.5 The results of the models 40

Education level of husbandEducation level of wifeEnglish level of husbandEnglish level of wifeGender of household’s headMinistry of Education and TrainingNumber of children

Household own a houseSector of employment of husbandSector of employment of wifeHousehold’s total expenditureWife is working

Vietnam Household Living Standard Survey

CHAPTER 1: INTRODUCTION

1.1 Problem Statements

Foreign language currently is a prominent issue in worldwide education and society.With the rapid development of information and communication technologies, throughcomputer systems and networks, people between nations are closer and closer togetherunderstand each other through intermediate language that commonly is the English Most

of the knowledge such as books, academic papers, documentation in economy, science andtechnology, culture and society are mainly written in English and widely circulated onthe global network Bolton (2006) likened the English expansion as the most rapid spreadlanguage all over the world In addition, the communication between different languagespeople through this common language which can understand and move toward the agreedlong-term good cooperation In reality, English is rated as the most used and commonspeaking language in the world with more than 1,226 million users in 2003 and spread on

75 countries on the world according to Crystal (2003) Graddol (2008) figures that thereare more and more people learning English as a second language and it will nearly get bigamount of two billions next ten years There was also a replacement of English as a schoolsubject instead of Russian from the participation of some Eastern European countries(Modiano, 2006) Since educating English was identified as an important factorindispensable, it should be considered by government investment, according to Nergis,(2011)In some developing countries such as Turkey, they recognize that “the only way tobring Turkish up to the level of the communicational requirements of the modern world isthrough the interaction of knowledge of English with the derivational convenienceprovided by the Turkish language reform.”

In Vietnam, Thinh (2006) observed that in the past ten years before the joiningWTO, the spread of English has facing with an unpredicted speed in Vietnam Thestatistics shows that among the foreign language learner, the English learner takes up morethan 90% of that volume While other languages such as Chinese, Japanese, French,

Korean, and German shares the rest of volume with smaller classes There was theemergence of requiring English for job seeking and the overseas studies which impulseover 900,000 learners came to the language centers in Ho Chi Minh city Moreover,teaching English program was also started at the universities, high schools, governmentagencies at that period time After the accession to the WTO accompanied with openpolicy has attracted a large number of foreign investors to enter the domestic market withsmall and large projects and the huge investments To meet the sufficient qualified laborforce and ability to work with foreign partners, to communicate and understand the partner

is an important issue emerged at the present time Therefore, learning language is an urgentissue arises in the context of the integration of the international economic today.Recognizing the need for English language development, many parents are planning fortheir children a foundation of language, namely English, since they start school

For these reasons, this study is to investigate how important parents see the role ofEnglish education by identifying parents’ expenditure on educating English language oftheir children at starting school age (primary school) in Ho Chi Minh city Then, it helps toclarify the important role of English language education in general and English inparticular for the development of the country which should be concerned and invested byboth the individual investor and the government in Vietnam

1.2 Research Objectives

General objective: To investigate household’s expenditure on English languageeducation for children at starting school age (primary school)

Specific objectives:

(1) To identify the importance of English language education in a household’s decision

(2) To identify the determinants of household’s expenditure on English education for primary school children in Ho Chi Minh City

1.3 Research Questions

In this study, we attempt to answer the question: Do parent’s income, parent working environment, parent’s English level and other demographic issue (age, gender, marital status, location, home ownership and employment status…) impact on the expenditure

to English education for their children? If yes, how much does it contribute to?

1.4 Research methodology

This study bases on Pritchett and Filmer (1999)’s theory of education expenditure.Empirically, it combines both descriptive statistics and regression analysis to analyze theimportance of English education and its expenditure determinants First of all, descriptivestatistic is used to analyse the overall view of English education expenditure of thehouseholds in Ho Chi Minh City based on their total income, total expenditure and some ofthe characteristics of the Ho Chi Minh’s household Second, the ordinary least square(OLS) is employed to figure out the influent factors of English language expenditure on thechildren at primary school age Third, the logit regression is applied to investigate whether

or not these determinants affect on the household’s decision to spend for their Englishlanguage education Fourth, the ordered logit regression are applied to settle the problemwhen the dependent variable, in this case is the English education expenditure, is not acontinuous but it is ordered In this study, the answer the expenditure on English is rankedfrom zero to sixth level which is not equal between these levels

1.5 The structure of the study

This study is basically divided into five chapters and here is the first chapter ofintroduction Following the first chapter, chapter 2 reviews the three theories of theeducation expenditure, the household production function and the income elasticity ofeducation expenditure Some recent empirical researches concerning the expenditure oneducation in Vietnam and around the world are also employed as the reference in thisthesis Next, chapter 3 is about the research methodology including the way of collectingdata, the variables’ explanation and measurement as well as the model specification The

chapter 4 will firstly present the overall information of the education in general and theEnglish education in particularly in Ho Chi Minh City Secondly, we will discuss about theinfluent factors such as parent’s total income, parent’s total expenditure, parent’s educationlevel and English level, and some of the household’s demographic characteristics whichwill affect on the English education expense for their children at the primary school age ornot?

CHAPTER 2: LITERATURE REVIEW

2.1 Theoretical literature

In order to comprehend the purpose of this research, we first discuss education expendituretheories

Theory of Education expenditure: Education production function

Pritchett and Filmer (1999) present a theory of education expenditure via theeducation production function Their theoretical literature shows that a “productionfunction” is an explanation of how much the amount of each input contributes to theamount of output Then, they apply it into the function of education In particularly, theeducation production function will study the causal effect of school inputs and nonschoolinputs on the children outcome The school inputs, for e.g the education level of teachers,the size of class, teacher experience, the tool supports education as textbooks wouldinfluence the children achievement score Whiles, the non-school inputs such as thefamily’s factors, environmental factors and children congenital ability would also affect theoutcome of children

The specific function of education production is defined as below:

Where Cit presents for children’s output, Sit presents for school inputs, Fit denotes the school inputs (family inputs) and Ii is the children’s congenital ability In this case, theyuse a general term to represent approximately the congenital variable that is fixed studentcontribution Because there is no data sets which can measure the nonfigurative variablelike congenital ability

non-Theory of household production function

Both Becker (1965) and Muth (1966) raise a household production function model

to explain that commodities which are purchased on market simultaneously are the input ofthe household production In particularly, they employ the production function of childhealth which can be shown as below:

Theory of income elasticity of educational expenditure:

According to Benson (1961), the level of household income has direct effect on theeducational expenditure which is measured by the income elasticity of education There arethree levels of income divided into low, middle and high income In detail, the households

at low and high income are expected to have the amount of income elasticity of educationfrom zero to one In contrast, a middle income household has value of income elasticity

higher than one This explains clearly that the middle income families have the tendency toconcern about their children’s education and they spend more money for them than theother class For the low income families, they less concern about the quality of schooling

so that their education expenditure are predicted increase less than their total income

Use the Lorenz curve to measure the distribution of income to the educationexpenditure The form of income elasticity of educational expenditure as follows:

Whereas E i is the elasticity of income v i (x) is the Engel function of the i expenditure items.

2.2 Empirical literature

2.2.1 Dependent variable

In this research, we attempt to explain the dependent variable that is the expenditure

of English language education In the study of English-language proficiency among U.Simmigrants, Espenshade (1997) consider English language education as a human capitalinvestment It concerns the expenses for the investment and the relevant expected returnwhich spenders would response differently Consequently, expenditure on English is adiversified and complex variable so that it could not be able to interpret by oneindependent variable There are not many studies regarding this field Mainly works didstudy the expenditure of education in general but not in the detail of educating Englishlanguage According to (Kanellopoulos (1997), Tansel (2006) and Donkoh (2011), thedisbursement of education is determined essentially by household income, householdexpenditure, parent’s schooling, sector of employment, employment status, age ofhousehold head, gender of household head, mother work or not, household size, local andown the house or not Learning from these previous studies of education expenditure, weemploy the above independent variables and develop the new model to figure out the

determinants of spending on English language education We will talk about the specific model later in the methodology section.

2.2.2 Independent variables

The impact of household’s income on education expenditure is precisely existed It

is clearly that once the households get wealthier they would like to enhance their livingstandards Education is one of the important standards which are considered to invest fortheir new generation in priority, Donkoh (2011) Both Glewwe (1999), Tansel and Bircan(2006) and Donkoh and Amikuzuno (2011) found that when the household’s income risethey are more willing to pay for the private tutoring

To evaluate the impact of income on education expenditure, the income educationalexpenditure elasticity of the household is employed as a proxy Most of the papers use theTobit model to valuate this income elasticity value (we will talk about the model later inthe methodology section) In particular, Hashimoto and Heath (1995) discovered thehighest income elasticity of education expenditure relates to the middle income level ofhousehold and the value is higher than one; while it ranges from zero to one for lower andhigher income class This means that the rise in education expenditure of the middleincome household is higher than other class as long as their income increases a unit Andthe lower and higher income class seems regardless the quality of their children’seducation Kanellopoulos and Psacharopoulos (1997) figured out the income educationalexpenditure elasticity in case of Greece is 3.18 Whereas, Hashimoto and Heath (1995)come up with different value 2.35 in Japan However, they both conclude that theeducation expenditure is a kind of luxury good But this is not true in the conclusion ofTansel and Bircan (2006) they found the unitary elasticity of income on education demand.Hence, they conclude education is not a luxury good in the case of Turkey as it isdiscovery in some researches

 Household total expenditure

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In this research, we analyze the issue regards the English language education, aninformal educational activity or also named as a private tutoring According to Stevensonand Baker (1992), the household tend to expense more money for investing in the informaleducational activities as long as they expect their children to get higher education andsuccessful career For this reason, it is easily to find that the probability of expense foreducational activities rises in accordance with the expenditure level of the households Thetutor fee spending for extra educational activities is about 11.2% of total expenditure of afamily Among them, the expenses for foreign languages education take more than sixty-three percents of their total expenditure, a dominated devote amount for education,Kanellopoulos and Psacharopoulos (1997) Their point of view is clearly that parents’spending for their children’s education increase sharply along with their total expenses.

In addition, there are some other outstanding issues concerning the way of choosingvariable so that it can avoid the simultaneous problem Some authors argued thesimultaneous between total expense and individual expense would result in the bias Andthey suggest use instrumental variable such as household’s income to settle this bias,Liviatan (1961) In order to do that, Tansel and Bircan (2006) attempt to test theexogeneity of total expense of a household This test is named as Tobit model, defined bySmith and Blundell (1986) and include two steps First is the regression of total spending

on household’s income Second is using the residuals from the regression one and put it inthe Tobit model of extra education spending to test the significance As a result, they foundthe significance at one percent reject the null hypothesis Hence, they use the total expense

of a household as an explanatory variable instead of using household’s income variable

 Parent’s education

There are many studies employ this independent variable to explain its relationship

of education expenditure such as Knight and Shi (1996), Kanellopoulos andPsacharopoulos (1997), Tansel and Bircan (2006), Qian and Smyth (2011) and Donkohand Amikuzuno (2011) Nearly all of them found the positive impact of parental education

to their spending for children’s education In there, Knight and Shi (1996) point out two

main findings: “(1) parent’s educational attainment is the most important factor influencingchildren’s education expenditure (2) Father’s education is more important factor thanmother’s education” Kanellopoulos and Psacharopoulos (1997) found the significance ofparental education on the household expenditure on their children’s education Thehouseholds where the head has higher education range are more willing to devote moreincome for education Specifically, it is approximately 2.2% increase in probability offamily agree to expense for education when a household head get one more year ofeducation.

Especially, some authors emphasize the important role of mother’s education inmaking the decision Qian and Smyth (2011) said “the household where mothers havesenior secondary school or college education are likely to spend more on education”.Donkoh and Amikuzuno (2011) claims it connects to the fact that the persons who are welleducated would be able and please to give their son/daughter the same opportunity andexpect them got higher education level

 Sector of employment:

Either Kanellopoulos and Psacharopoulos (1997) or Andreou (2012) come up withthe similar conclusion of this concerned that the households which are working in theprivate sector have tendencies to finance more for their son/daughter’s education Recently,Qian and Smyth (2011) also found that “household where fathers are working inprofessional occupations, are likely to spend more on education” So, the private sector isthe key determinants of in their research regarding the working environment of thehousehold head

 Employment status

According to Kanellopoulos and Psacharopoulos (1997), Donkoh and Amikuzuno(2011), the occupation of the parents could also affect the willingness of a household toinvest in children’s education There are two schools of thought about this issue One is theoccupation has a positive effect since it is supposed the lower class of household tend to

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compensate their lack of education by spending more for your children’s education Other

is the negative effect on their expense The upper class parents think that education brings

a relative low value in compared with their household value Hence, they disregard the role

of education Nevertheless, Andreou (2012) said the occupation of parents does not affectsignificantly on private spending for education

 Age of household’s head

Most of the studies employ the age of household’s head as an essential variable toevaluate its effect on the household’s investment in education Generally, the age of headappeared to be negative efficiency to their choice of spending according to Kanellopoulosand Psacharopoulos (1997), Donkoh and Amikuzuno (2011) and Andreou (2012)

Donkoh and Amikuzuno (2011) employ the age and age square variable representfor the young and old household head As a result, the older the household’s head, the lesswilling to spend for education They argue that the household with younger head isconsidered more advanced and comprehend the long-term benefit and the role of education

in comparison with their older counterparts

Kanellopoulos and Psacharopoulos (1997) divide this variable into six age groups:under 25, from 25 to 34, from 35 to 44, from 45 to 54, from 55 to 64 and above 65 Theydiscovered that the top of spender for education belong to the group with heads from 35-44years old It is approximately 62.6 percents of the heads in this group are pleasure to pay.And the probability of expenses decline after this group

Nevertheless, Tansel and Bircan (2006) stated differently about this context Whenanalyzing the demand for private tutoring expenditure in Turkey, they found that the moreaccumulation of head’s age, the more willing to pay for tutoring their child Hence, we willtest the affective trend of the household’s head age on the investment in their child’seducation expenditure

 Gender of household head

Likewise, we will attempt to test whether the gender would affect the householddecision on education expenditure Learning from the empirical studies, they apply thedummy for this variable Some studies found the differentiation between mother and fatherspending willingly on their son/daughter And that a female head tend to expense morethan a male head By contrast, Andreou (2012) did not find the meaning of gender on thehousehold’s head expenditure on education.

 Household size

One of the research studies the related field in case of Vietnam, Dang (2007)worked on “The determinants and impact of private tutoring classes in Vietnam” Heargues that the number of children in a household is possibly an endogenous variable sincethe family’s decision of their child may concern either the quantity or the qualitysimultaneously In more details, the parents would increase their investment in educatingtheir children as their household size is smaller That would be a choice concerning thequality rather than the quantity In addition, Jelani and Tan (2012) stated the same withDang (2007) He reasons that an additional child causes the rise of the family expenditures

so that it would result in the less investment of parent in the education However, in thepaper of Donkoh and Amikuzuno (2011) they emphasize the quantity aspect As the largersize of the household, the more probability of the parents expense for education

 Local

The authors such as Tansel and Bircan (2006) and Donkoh and Amikuzuno (2011)found the precise link between the higher expenditure on education and the urban areas.They all conclude that the household in urban areas tend to spend more money foreducating their child in comparison with rural counterparts Only Andreou (2012) said thevary household’s region does not result in different of education’s disbursement

In particular, Donkoh and Amikuzuno (2011) states the differentiation of thenumber of household expense for private education (the quantity of spending) and theamount of money they spend (the quality of spending) Their study shows there is a larger

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number of household agree to spend for education in the rural part than the city part Bycontrast, the concentrated city has the higher quality of education investment than the ruralpart Thus, we will have household’s location as an endogenous variable as same as theabove mention about the household age.

 Household own a house

Both Kim and Lee (2002) and Donkoh and Amikuzuno (2011) claim that thehousehold own a house is more likely to expense for their children’s education It is wellaccepted that having a house is equivalent to the better living conditions as well ascorrelated to the higher income For these reason, they are easier to take the charges oftheir son/daughter’s education

2.3 Conceptual framework

Overall of the above empirical literature, the study is going to test the relationshipbetween the private expenditure for English education and the explanation variables as thefollowing:

Figure 2.1 Analytical framework for the impact explanatory variable on English education expenditure

PRIVATEEXPENDITUREfor English languageEducation

…

Source: Author’s analysis

CHAPTER 3: RESEARCH METHODOLOGY

3.1 Sampling strategy and data collection

The study used the primary data collection by face to face survey A questionnairewas composed to cover the main questions which includes household’s total income,parent’s education level and English level, career of the parent, and some otherdemographic issue (age, gender, marital status) The households surveyed include thosewith children at pre-primary and primary education level in Ho Chi Minh City Thehouseholds were chosen randomly from each districts or sub districts Households wereselected randomly by the number of house and in one random ward of the district About

20 households were interviewed in each districts/sub-districts The internal districts in HoChi Minh City comprise district one to twelve, Tan Phu, Tan Binh, Binh Tan, Binh Thanh,

Go Vap, Phu Nhuan The sub-districts include Binh Chanh, Hoc Mon, Cu Chi, Nha Bewhereas we excluded the Can Gio’s observation because of its low population density

When a questioned household which has no children at the primary school age, weask the next house for replacement If the next three houses have no children at ourobjective age, we will leave this sample empty Some chosen households leave the emptyanswer sheet due to their private issues Hence, some districts didn’t get enough 20responses and finally the survey got 267 observations in total for this study Thequestionnaires table would be listed in the annex

3.2 Variables’ measurement and explanation

3.2.1 Current expenditure on English education

As mentioned above, the expenditure on English is a diversified and complicatevariable It is considered as a human capital investment, Espenshade and Fu (1997) Itconcerns the expenses for the investment and the relevant expected return which spenders

would response differently Since there are not many studies related to the languageeducation expenditure, we employ factor affect the spending for general education and thendevelop a new model for the case of English education expenditure Following the resultsfrom these researches of Kanellopoulos and Psacharopoulos (1997), Tansel and Bircan(2006) and Donkoh and Amikuzuno (2011), this study focus on researching some similarfactors such as the household’s total income, household’s total expenditure, parent’sschooling, sector of employment, age of household head, gender of household head,mother work or not, household size, local and own the house or not Then pointing outwhether or not these factors would impact on the spending manner for English education ofthese household’s.

In this study, we use the current expenditure on English education to measure theinterest level of their parents to the children’s language education It is divided into 6levels: zero means no expenditure for English education at the present time, one means thecurrent expenditure is ranked from 0 to 300,000 VND, two means the current expenditure

is ranked from above 300,000 to 500,000 VND, three means the current expenditure isranked from above 500,000 to 1,000,000 VND, four means the current expenditure isranked from above 1,000,000 to 2,000,000 VND, five means the current expenditure isranked from above 2,000,000 These ranks are based on the average current fee of the extraEnglish class at school and the English center The price is collected from ten school andeleven English center for the beginning and pre-intermediate class for primary children.See the list of school and English center in the appendix

3.2.2 Household’s total income

As discussion in the previous chapter, the impact of household’s income oneducation expenditure is considerable Once the households get wealthier they tend toenhance their living standards in which education is one of the important standards toinvest, Donkoh and Amikuzuno (2011) Both Glewwe and Desai (1999), Tansel andBircan (2006) and Donkoh and Amikuzuno (2011) found that when the household’sincome rise they are more willing to pay for the private tutoring In this study, we suppose

that English education is one of the types of private tutoring and hence, it is influenced bythe household’s total income There are two methods to evaluate the impact of income oneducation expenditure: direct and indirect evaluation The direct evaluation measures theimpact of all levels of income to the current payment for English education in the OLS andProbit/Logit model Whiles, in the indirect evaluation the income is divided into low,middle and high income and then applied to calculate the income elasticity of Englisheducation expenditure It is executed by the Tobit model.

In this study, the household’s total income variable is also divided into five levels:(1) below 5,000,000 VND, (2) from 5,000,000 VND to 10,000,000 VND, (3) from10,000,000 VND to 20,000,000 VND, (4) over 20,000,000 VND in direct evaluation

method And it’s ranked as low, middle and high income in the indirect evaluation method.Based on the classification of income group of the World Bank 2012, low income is thegroup which has GNI per capita equal or less than $1,035 per capita; lower middle income,

$1,036 - $4,085; upper middle income, $4,086 - $12,615; and high income, $12,616 ormore As calculation to VND, it means that lower income, 1,811,250 VND/head/month orless; lower middle income, from 1,813,000 to 7,148,750 VND/head/month; upper middleincome, from 7,148,750 to 22,076,250 VND/head/month; high income, 22,078,000VND/head/month Relatively, we suppose that low income group is the level (1) income,below 5,000,000 VND; middle income group is comprised of level (2), (3) and (4); highincome group is level (5)

In the previous empirical studies, the highest income elasticity of educationexpenditure belonged to the middle income level of household and the value is higher thanone; while it ranges from zero and one for lower and higher income class This means thatthe rise in education expenditure of the middle income household is higher than other class

as long as their income increases a unit And the lower and higher income class seemsregardless the quality of their children’s education according to Hashimoto and Heath(1995) However, some studies found no difference between these income groups whichaffect on education demand For these reasons, the paper is going to investigate whether

income increase would bring positive expenditure for English education or not and whetherincome elasticity of English expenditure between the low, middle and high income groupare different? Overall, relied on theoretical studies and prior empirical researches, the studyaims to test the following hypothesis:

H1: The household’s total income has positive relationship with the English education expenditure children

3.2.3 Household’s total expenditure

In this research, the household’s total expenditure is also employed to value therelationship with the spending on English education According to Stevenson andStevenson and Baker (1992), the household tend to expense more money for investing inthe informal educational activities as long as they expect their children to get highereducation and successful career For this reason, it is easily to find that the probability ofexpense for educational activity rises in accordance with the expenditure level of thehouseholds Kanellopoulos and Psacharopoulos (1997) point out that the expense forforeign languages education takes more than sixty-three percents of their total expenditure

on general education Consequently, it is clearly that parents’ spending for their children’seducation increase sharply along with their total expenses

In our case, we did use the multiple choices for the answer of total expenditurequestion Based on the result of VHLSS data set 2010, the total expenditure answer in thisstudy is ranked into six levels: (1) below 2,000,000 VND, (2) from 2,000,000 VND to3,500,000 VND, (3) from 3,500,000 VND to 5,000,000 VND, (4) from 5,000,000 VND to10,000,000 VND, (5) over 10,000,000 VND The study will test two contents: first test iswhether there is a positive relationship between the household’s total expenditure andEnglish education expenditure Second is whether the simultaneous between total expenseand individual expense would result in the bias by using the income as instrument variableaccording to Liviatan (1961) In order to do that, Tansel and Bircan (2006) attempt to testthe exogeneity of total expense of a household This test is named as Tobit model, defined

by Smith and Blundell (1986) and include two steps Step one is the regression of totalspending on household’s income Step two uses the residuals from the regression one andput it in the Tobit model of extra education spending to test the significance In case of theregression result find the significance to reject the null hypothesis, we can use the totalexpense of a household as an explanatory variable instead of using household’s totalincome variable.

In summary, the study is going to test the proposed hypothesis as following:

H2: The level of household’s total expenditure has positive relationship with the English education expenditure.

H3: The current expenditure on extra education relates to the English

education expenditure

3.2.4 Parents’ education level

Many studies found the positive impact of parental education to their spending forchildren’s education such as Knight and Shi (1996), Kanellopoulos and Psacharopoulos(1997), Tansel and Bircan (2006), Qian and Smyth (2011) and Donkoh and Amikuzuno(2011) More detail, Knight and Shi (1996) stated that “Father’s education is moreimportant factor than mother’s education” Thus, the study investigates on the parent’seducation level to find out the association of it to the English education expenditure.Similarly to the VHLSS 2010, the education level is ranged from one to eight in which themother or father had finished the Primary school, Junior high school, Senior high school,Primary vocational school, Colleges, University, Master and Physical of doctorrespectively The study attempt to test the hypothesis as below:

H4: Parents’ education level has a positive relationship with the expenditure on English education

H5: The level of English of Parents is positively related to their spending on English education

3.2.5 Parents’ sector of employment

As the above mention, we see the households which are working in the privatesector have tendencies to finance more for their son/daughter’s education, Kanellopoulosand Psacharopoulos (1997) or Andreou (2012) In this part, we want to figure out whetherthe different sector of employment would impact on the manner of English educationexpenditure For example, the parents work in the private sector which concerned foreignfactors like a foreign company or Non Government Organizations (NGOs) are likely tospend more on English education of their children or not? In the situation of Ho Chi MinhCity, there are four universal sectors of employment: Public sectors, Private sector whichincludes the domestic company, Private sector which includes foreign company and thehouseholds which are working in the private sector have tendencies to finance more fortheir son/daughter’s education The rest would be classified as others This variable ismodified as a dummy variable Each different sector would be considered as a dummyvariable when running the regression Totally we got four dummy variables in comparewith the control variable, public sector As a whole, the study would test the followinghypothesis:

H6: Parents’ sector of employment could explain the current expenditure on English education.

3.2.6 Gender of household’s head

Some studies found the differentiation between mother and father spendingwillingly on their son/daughter In order to clarify this point of view, we will attempt to testwhether the gender of household head would affect the household decision on the Englisheducation expenditure Learning from the empirical studies, we apply the dummy for thisvariable Whereas, zero represent to female and one represent to male After that we runthe test of below hypothesis:

H7: There is a difference between a mother household’s head and father household’s head

in their way of expense on their children’s English education.

3.2.7 Parents’ age

Generally, the age of head appeared to be negative efficiency to their choice ofspending according to Kanellopoulos and Psacharopoulos (1997), Donkoh and Amikuzuno(2011) and Andreou (2012) Donkoh and Amikuzuno (2011) explained the household withyounger head is considered more advanced and comprehend the long-term benefit and therole of education in comparison with their older counterparts Nevertheless, Tansel andBircan (2006) stated reversely When analyzing the demand for private tutoringexpenditure in Turkey, they found that the more accumulation of head’s age, the morewilling to pay for tutoring their child

Learning from Donkoh and Amikuzuno, we employ the age and age square variablerepresent for the young and old household’s head However, we separate it into fourvariables that are husband’s age, husband’s age square, wife’s age and wife’s age square inthis study And then we will test the affective trend of the household’s head age on theinvestment in their child’s education expenditure according to the below hypothesis:

H8: Parents’ age has a negative impact on current payment for English education

H9: Household has wife are working is more likely to spend on their children’s English education

3.2.8 Location of household

The principal of this point of view is that the household in urban areas tend to spendmore money for educating their child in comparison with rural counterparts according toTansel and Bircan (2006) and Donkoh and Amikuzuno (2011) In this study, because welimit the research area to Ho Chi Minh City, so we could only test whether or not it has thedifference from urban areas and the suburban areas on the expense for English education.This variable is treated as a dummy variable in which one represent for the household inurban area and suburban is the comparison variable Accordingly, the proposed hypothesisis:

H10: Households in urban area are likely to spend more on English education for their children than the suburban area.

3.2.9 Household owns a house

Some studies conclude that the household own a house is more likely to expense fortheir children’s education such as Kim and Lee (2002) and Donkoh and Amikuzuno(2011) It is also well accepted that having a house is equivalent to the better livingconditions and more likely to spend for their children’s education For these reason, we’regoing to test the relationship between household own a house to their spending for Englisheducation And attempt to test whether it has interaction with the household’s totalexpenditure Same as before, it is treated as a dummy variable with 1 present for householdown a house and 0 for household does not own a house After all, the study would test thebelow specific hypothesis:

H11: Households which own a house are more willing to pay for their children’s English education.

3.2.10 Number of children

According to Dang (2007), the number of children in a household is possibly anendogenous variable since the family’s decision of their child may concern either thequantity or the quality simultaneously In more details, Jelani and Tan (2012) support thequality aspect That is an additional child causes the rise of the family expenditures so that

it would result in the less investment of parent in the education In contrast, Donkoh andAmikuzuno (2011) emphasize the quantity aspect As the larger size of the household, themore probability of the parents expense for education Therefore, this study will work onthe household size variable whether it had impact on English education expenditure If so,what is the trend of impact? Does it cause positive or negative effect on the Englisheducation expenditure?

H12: Number of children has a negative impact of the English education expenditure

Whereby, E represents for the current payment for English education, X denotes for

income variable, Y denotes for English level of parents, Z is the parents’ workingenvironment; and T presents for the group of other demographic factors such as parent’sage, gender of household head, wife working or not, number of children, location ofhousehold and household ownership, etc…

Specifically, the different regression methods are applied to find out the aboveresearch objectives Firstly, the Ordinary Least Square (OLS) regression is employed totest whether there has relationship between dependent variables and independent variables

In this case, there are two specific models employed as following:

Model 1: OLS model 1

Model 2: OLS model 2

Model 3 and model 4: Logit models with income (model 3) and expenditure (model 4)

Secondly, the logit regression is applied to investigate whether or not thesedeterminants affect on the household’s decision to spend for their English languageeducation Because the spender is a 0-1 limited dependent variable, a logit model is fittedwith this analysis Difference from the OLS regression, this model presents the probability(P) of a household expenditure on education as a function of various characteristics

Where P is probability of dependent variable of a household spending for education,

β is the logit coefficient and X is the bunch of independent variables use for evaluate thedependent variable such as household characteristic such as income, household’s head age,gender, location, according to Kanellopoulos and Psacharopoulos (1997) In thisregression, it is separated into two model 3 and 4 whereas model 3 analyze bunch ofincome and other explanatory variables and model 4 employ the total expenditure andother explanatory variables to compare with model 3 The marginal effects of eachexplanatory variable after the logit model are calculated to evaluate the impact rate of them

on English education expenditure

Model 5: Ordered Logit model

As long as the English education expenditure in this study is not a numeric formattype and it is categorized into six levels from zero to five which called ordinal dependentvariable Hence, the ordered logit model is suitable for analyzing the relationship betweenthis kind of ordered dependent variable and the set of independent variable In this model,

the ordered outcomes are estimated as a linear function of the set of explanation variablesand the cutpoints According to Fu (1998), the probability of observing outcome Icorrespond to the probability of estimated independent variables plus the error term, withinthe level of the cutpoints It is treated as below function:

Pr (cpe j = i) = Pr (K i-1 < β 1 x 1j + β 2 x 2j + … + β k x kj + u j < K i )

Where,

cpe j is defined as current expenditure for English education at level 0 equal to no

expenditure; 1 equal to the expense below 300,000 VND, 2 equal to the expense from300,000 VND to 500,000 VND, 3 equal to the expense from 500,000 VND to 1,000,000VND, 4 presents for the expense from 1,000,000 VND to 2,000,000 VND and 5 for theexpense over 2,000,000 VND

x 1, x 2, … x kj denotes for the independent variables: the household’s total income, total

expenditure, current payment for extra class, parents’ education level, parent’s Englishlevel and some others demographic characteristics such as parent’s age, gender ofhousehold head, wife working or not, number of children, location of household andhousehold ownership

β 1 , β 2 , … β k denote for the explanation coefficients

K 1 , K 2 ,… K k-1 , are the cutpoints

u j is the logistically distributed of error term

Table 3.1: Variable description and expected sign for Model 1

dIncome2 Dummy household’s total income variable Equal to income rank from VND Positive (+)

5,000,000 to 10,000,000; otherwise equal to income below 5,000,000

dIncome3 Dummy household’s total income variable Equal to income rank from VND Positive (+)

10,000,000 to 20,000,000; otherwise equal to income below 5,000,000

dIncome4 Dummy household’s total income variable Equal to income rank over VND Positive (+)

20,000,000; otherwise equal to income below 5,000,000

dtotalexp2 Dummy total expenditure variable Equal to rank from 2,000,000 to VND Positive (+)

3,500,000; otherwise equal to income below 2,000,000

dtotalexp3 Dummy total expenditure variable Equal to rank from 3,500,000 to VND Positive (+)

5,000,000; otherwise equal to income below 2,000,000

dtotalexp4 Dummy total expenditure variable Equal to rank from 5,000,000 to VND Positive (+)

10,000,000; otherwise equal to income below 2,000,000

dtotalexp5 Dummy total expenditure variable Equal to rank over 10,000,000; VND Positive (+)

otherwise equal to income below 2,000,000

26

eduh Education level of husband Ranked from 1 to 8 level Positive (+)

englishh Dummy English level of husband variable Equal to 1 if he know English, Positive (+)

otherwise equal to 0

englishw Dummy English level of husband variable Equal to 1 if she know Positive (+)

English, otherwise equal to 0

dwifeworking Dummy employment status of the wife variable Equal to 1 if she stays at Negative (-)

home, otherwise equal to 0

dlocal Dummy location of the household variable Equal to 1 if it locates in Possitive (+)

urban area, otherwise equal to 0

ownh Dummy variable of household own a house Equal to 1 if they own a Possitive (+)

house, otherwise equal to 0

Source: Author analysis

CHAPTER 4: EMPIRICAL ANALYSIS RESULTS

This chapter mostly represents the empirical analysis result and discussion Firstly, thechapter presents the overview information of the education in Ho Chi Minh City In there,

we focus on the parent’s education and parent’s English level as well as the incomestructure in HCM City Secondly, the section summarizes the English education system in

Ho Chi Minh City Thirdly, the study comes out with the empirical analysis results of thecollected data

4.1 General information of the Household’s characteristic in HCM City

From the survey, the study find that the parents’ education level of household whichhas children at primary school age in Ho Chi Minh City mainly belong to Senior highschool and University level In there, the wife and the husband have nearly equivalenteducation distribution However, the husband seems having higher education level than thewife in general As we can see in the below figure 4.1, the percentage of husband completeuniversity is 29.96% while it is only 25.09% for the wife Moreover, within the conductedhouseholds, the household has husband finish Physical of Doctor degree are 7.87%whereas there is no household with wife get this high education level

In comparison with the result of Vietnam household living standard data set(VHLSS 2010), the statistical overview of families shows: (1) the higher education level ofhusband than woman; (2) parents’ education level in HCM City substantially distribute in

no education, primary and junior high school and senior high school Besides, the parentsget university also takes a considerable number at 11.69% in total

Figure 4.1 The education level of the parents in Ho Chi Minh City – Author’s survey 2013

Source: Author’s analysis

Figure 4.2 The education level of the parents in Ho Chi Minh City – VHLSS 2010

Source: VHLSS 2010

4.2 General information of English education in Vietnam

In Vietnam, the English in general education is assigned as a compulsory subject from junior high school and senior high school From the year 1982 to 2002, it was set into

two programs of learning and teaching English: the three year set for student from class 10– 12 and the seven year program for those started learning from class 6 – 12 However,after 2002, English is a forced subject for junior and senior high school as well as being anelective subject at primary school In primary school, English is taught from class 3 – 5with two periods week, whereas, it increases to three periods per week for junior andsenior high school This new English language teaching program has been used for thewhole general educational system of Vietnam to the present The propose of this program

is to equip the student after finished senior high school a basic knowledge of English beable to use proficiently English at four skills: listen, speak, read and write and the ability tounderstand the same level of textbook with the assist of dictionary

For the developing of English education, according to Ministry of Education andTraining (MOET), the number of foreign language in Vietnam increases sharply from 843

to 1,935 centers in five years from 2008 to 2013 See below table for the yearlydevelopment of language center in last five years Moreover, there is a National ForeignLanguages 2020 Project according to Decision No 1400/QD-TTg signed on 30/9/2008 bythe Prime Minister to “Teach and learn foreign language in the national education system,period 2008 – 2020” It was a great and potential project if it had done successfully Theproject firstly develops and issues the unique, detailed qualifications framework of foreignlanguage, including 6 levels, compatible with the international language proficiency level.Secondly, develop and implement new foreign language training programs compulsory atthe basic school level to meet the following qualifications after graduation: primary schoollevel 1 qualifications according qualifications framework of foreign language; junior highschool level 2, senior high school level 3 of qualifications framework of foreign language.Thirdly, implement training according to new foreign language program for the university.Establish and implement teaching by English in some basic subjects and major subjects forthe last year student of university

However, the actual situation of teaching and learning English in Vietnam is stillinsufficient Along with learning English at school, some parents also equip their children

with English knowledge by sending them to the center of English Currently, there aremany domestic and international English language centers which are operating efficientlyand high profits The English international center such as the British Council, VUS, VASS,Apollo, ILA are available in Ho Chi Minh City and Hanoi; are planning for the largeinvestments and expand on a national scale In addition, there are numerous other smallcenters, the type of English education at school and at home Hence, many schools andEnglish center from either private or public sector established to meet the enormousdemand of English education in Vietnam.

Table 4.1 The development of number of foreign language center through the years

2008-2009 2009-2010 2010-2011 2011-2012 2012-2013

Source: Ministry of Education and Training

4.3 Importance of English expenditure in household’s decision

It can be seen from the figure 4.3 that the current payment for English education ofhousehold in Ho Chi Minh City plays an important role in total expenditure for education

It takes up 61.4% of basic education in average The basic education is the measure of totaleducation fee at school On the other hand, compared with household’s total income andtotal expenditure, it makes up 4.7% and 6.7% of total income and total expenditure,respectively The study also performs that education English is considered as same as theprivate tutoring It shows 84.7% and 84.3% household agree to spend for English and forother extra class in turn Mainly the spending are below 300,000 VND per month and300,000 VND to 500,000 VND per month See the table in appendix

Figure 4.3 The distribution of current English education expenditure in basic education,total income and total expenditure