Migrants and non migrants wage differentials in southeast provinces of vietnam

lY ListofTables...vi:i ListofFigures..... Monthlyaverageincome classifiedbytypesofoccupationandregions..41 4.2.3.. Monthlyaverageincomeclassified bysectorsandregions...42 4.2.4.. Chapter

Thisresearchisimpossiblecompletedwithoutthevaluableguidance,encouragementandadvicefromnumerousindividualsincludingVietnam-

Netherlandsp r o g r a m lecturers,friendsandmyfamilymembers.Iwouldliketoexpressmyspecialthankstoallpeopletowhatthey havedoneformythesiscompletion

providingmewith ano p p o r t u n i t y top u r s u e mydesiresi n h i g h e r learning

Andfinally,Iwouldliketoexpressmysp ecial thankstomyfriendsinMDEclass14 fortheirsupportivef ri en d sh ip fromthebeginningd a y Ij o i n e d t h e VNPprogram,a n d theircontinuoussupportduringmyresearchcompletion

Abovea l l , pleases y m p a t h i z e f o r mea n d d o knowt h at I wouldb e s o gratefulf o r thosewhosupport mealotinthisthesiscompletionifIforgettomentiontheirnames

a s , i n d i c a t e s o m e m a i n p o i n t s T h e w a g e d i f f e r e n t i a l s

betweennon-migrantandmigrantworkersaremostlyduetothe

differenceinstructuralfactors.Besides,therearedifferencesinendowmentfactors

pJjj"jg;ji C i n

Acknowledgements

› i

Abstract 111

Contentt a b l e

lY ListofTables vi:i ListofFigures x

Listo fA b b r e v i a t i o n s xi

CHAPTER1 : INTRODUCTION 1.1 Problemstatement 1

1.2 Researchobjectives 3

1.3 Researchquestions 3

1.4 Thesisstructure 3

CHAPTER2:LITERATUREREVIEW 2 1 Definitionofmigration 2.2 Reviewsoftheoreticalframework 6

2.2 1 Relatedtomigration 6

2.2.1.1 Humancapital theory 6

2.2.1.2 Harris—Toradomodelformigration

2.2.2 Relatedtowage determinationandwagedifferentials 9

2.3 Previous empiricalstudies 12

2.4 Chapterremarks 18

CHAPTER3:RESEARCHMETHODOLOGY 3.1 Empiricalmodel 19

3.1.I Earningsfunction 19

3.1.2 Earningsdifferentialsmeasurement 21

3.2 Definitionofvariablesusedinstudy 22

3.2.1 Dependentvariable 22

3.2.2 Independentvariables 23

3.3 Datasource 27

3.3.1 Introductionofthedataset 27

3.3.2 Thereliabilityofthedata set 28

3.3.3 Detailofdata 28

3.4 Estimationstrategy 30

3.5 Chapterremarks 31

4.I,¶, Earnings, 6

4.1.6 Durationofresidence 38

4.1.7 Typeofoccupation 39

4.2 Earningsofworkers 40

4.2.1 Monthlyaverageincomeclassifiedbygenderandregions 40

4.2.2 Monthlyaverageincome classifiedbytypesofoccupationandregions 41

4.2.3 Monthlyaverageincomeclassified bysectorsandregions 42

4.2.4 Monthlyaverageincomeclassifiedbyeducationlevelsandregions 43

4.2.5 Monthlyaverageincomeclassifiedbycharacteristicsofmigrantand non-migrantworkers 44

4.3 Chapterremarks 46

CHAPTER5:DETERMINANTSOFEARNINGSANDWAGEDIFFERENTIALS OFMIGRANTS AND NON-MIGRANTS 5.1 Determinantofearnings 47

5.1.1 Estimationresultsofmodel1withOLSand2SLS 47

5.1.2 Theeffectofyearsincemigrationonmigrant’searnings(model2) 50

5.l.3 Determinantsofearningsformigrantsandnon-migrants(modelI) 52

5.2 WagedifferentialswithOaxaca’smethod 55

5.3 Charterremarks 57

CHAPTER6: CONCLUSIONAND POLICYIMPLICATION 6.1 Conclusion 59

6.2 Policyi m p l i c a t i o n s - - - - 61

6.3 Limitationo f theresearch 63REFERENCES

APPENDICES

Table5.6:Earningsdifferentials betweenmigrantsandnon-migrantsbyOaxaca’s method

, LISTOFFIGURES

Figure4.1:Percentageo f employedb y cu rr en t r e s i d e n c e a n d migrations t a t u sFigure4.2:Monthlyaverageearnings (thousandVND)

bycurrentresidence,migrationstatus,agegroup

UNFPA :theUnitedNations PopulationFunds

e t O n e o f t h e o u t s t a n d i n g c h a n g e s i s t h a t increasingtheparticipationlevelinlaborforceofmigrants.

Infact,migrationisaninevitableresultofdevelopmentbecauseVietnamhasbeendevelopingfastafterreformsinthelast1980.Therefore,theincreasingmigrationlevelisnotamazed.Comparingthedataofgeneralinvestigationin1989and1 9 9 9 showsthatmigrationlevel risesaboutthethird(GSO,2005).Theincreasingportionofmigrationmovesprimarilytotheurbanareas,especiallybigcitiesasHoChiMinhCityandHaNoi,andadjacentindustrialzonestothesecitiessuchasBinhDuongandDongNaiindustrialparks.Inthisthesis,HoChiMinhCityandBinhDuong,DongNaiprovincesareselectedtostudyaboutmigrantsandnon—

Accordingt o s t a t i s t i c s o f G e n e r a l S t a t i s t i c s O f f i c e , i n 2 0 0 4 , t h e r a t e o f m i

g r a n t s i naboves t u d i e d a r e a s i n c r e a s e n e a r l y d o u b l e c o m p a r e d t o t h e y e a r 1999(from9 19%in1999to18.15%in2004).Whilemigrationisoftenblamedforthe

overcrowding,pollutionandu n e m p l o y m e n t issuesi n t h e d e s t i n a t i o n , migrationconstitutesani m p o r t a n t l a b o r forcei n Ho C h i M i n h c i t y , Binh D u o n g a n d D o n g

N a t p r o v i n c e s F r o m t h e c o n d u c t e dresearchesi n Vietnams h o w s thatm o s t o

f migrantsr e c e i v e t h e b e n e f i t s t o economicaspectf r o m t h e i r m o v e m e n t M a n

y m i g r a t i o n s t u d i e s i n Vietnamr e v e a l t h a t t h eparticipationlevelinlaborforceofmigrantsishigherthannon—

r c o u n t r y s i d e , i s thatt h e qualityoftheschoolingandexperienceobtainedinthehomelandislowerthanthequalityofschoolingandexperienceinbigcities.Anumberofstudiesshowthat

thisisalsothecaseinothercities(BratsbergandRagan,2002; Friedberg,2 0 0 0 ; S c h o e

n i , 1 9 9 7 ) Allo f aboveproblemsmentionedanemergentissue,whichiswhethertheearningsgapexistsinVietnam,especiallyinb i g city

2

+ Chapter2isforreviewingofliteratureontheoriesrelatedtomigration,theoretical

backgroundofwagedetermination,wagedifferentialsandempiricalevidences.+

Chapter3 p r o v i d e s m e t h o d o l o g i c a l f r a m e w o r k I n t h i s c h a p t e r , t h

e v a r i a b l e s , modelsanddatawillbespecifiedindetail

+Chapter4 providesano v e r v i e w understandingoft h e demographicandsocio—economiccharacteristicsofmigrantsandnativesinHoChi

Minhcity,BinhDuong,andDongNaiprovinces.Bes id es ,i t alsoshowstherelationshipbetween e a r n i n g s andeducationallevels,typesofoccupation,gender

andsectors

+C h a p t e r 5 a n a l y s e s a n d p r e s e n t s d e t e r m i n a n t s o f e a r n i n g s a n d f a c t

o r s t h a t contributetomigrantsandnon—migrantswagedifferentialsinHoChiMinhcity,BinhDuongandDongNaiprovinces

+C h a p t e r 6givessomeconclusionsandpolicyimplicationsoftheresults,limitationsoftheresearch,andsuggestionsforfuture research

4

CHAPTER2 LITERATURER E V I E W

Thepurposeof

thischapteristopresentbasicconcept/definitions,relatedtheoriesandpreviousempiricalstudiesontheearningsdifferentialsofmigrantandno-

Migrantproblemi s referredm u c h in thepublications,s c i e n t i f i c d o c u m e

n t s , o rmeansofp u b l i c communication,butt h e r e isn o au n i t e d definitionofm i g r a t

i o n Ingeneral,migrationis consideredasthemovementofpeoplefromthisplacetoanother.However,definitionsofmigrationdifferamongscholars

AccordingtoLee(1969),hesaidthat“norestrictionisplaceduponthedistanceofthemoveoruponthevoluntaryorinvoluntarynatureoftheact,andnodistinctionismadebetweenexternalandinternalmigration”.Thisdefinitionshowedthatthosewhovisittheirfriendso r r e l a t i v e s w o u l d bea d d e d t o t h

e m i g r a n t s Hence,i t w o u l d r e s u l t ina nexaggerationofthenumberofmigrants.Similarly,Borjas( 2 0 0 1 ) def ines that“m i g r at i o n isthemovefrom

onegeographicareatoanother.Residentialmigrationoccurswhenthehousehold(orperson)changesitsplaceofresidencebymovingfromoneneighborhoodtoanotherwithinthesamelocalarea.Internalm i g r

a t i o n occurswhenthehouseholdmovesacrosslargergeographicallydistinctunits—

suchascounties,metropolitanareas,states,orprovinces—

butremainswithinthesamecountry.Internationalmigrationoccurs

whenthehouseholdmovesacrossnationalboundaries.”

personisdefinedasanindividualeitherwasbornandgrown-upinthatcity,atthepresent,thispersonislivingandworkingathere,orarrivesincityfromotherprovincesandnowislivingandworkinginhere,buttheyhavealreadyhadpermanentaddress

59,andmovedfromtheprovinceregistered tostaytoanother withinthefiveyearsbeforethesurvey(from1999to2004)andhaveresidedinthehouseholdinthestudyareaforonemonthandover.NotethatforHCMC,thosewhomovedf r o m onequartertoanotherwithina cityhavenotcoveredbythisdefinition.Conversely,non—migrantsincludethosewhoareintheagegroup15—59andnotdeterminedasmigrants

2.2 Reviewsoftheoreticalframework

2.2.1 Relatedt o m i g r a t i o n

2.2.1.1 HumanC a p i t a l Theory

6

classicaleconomicsstatesthatp eop le m i g r a t e f o r purposeo f increasingt h e i r ea r n i

TheHumanCapitalTheoryofmigrationoriginatedinneo-n g c ap ac i t y toaTheHumanCapitalTheoryofmigrationoriginatedinneo-noptimalpoint(Sjaastad,1962)

Thehumancapitaltheoryassumesthatpeopledesiretomaximizetheirnetrealincomeovertheirproductivelifeandcanatleastroughlycomputetheirlifetimeincomestreamsinthepresentplaceofresidenceaswellasinallpossibledestinations.Therefore,inthehumancapitalviewofmigration,migrationisconsideredasinvestmentdecision.Itmeansthatindividualsandfamilieslookatthenetpresentvalueofamovementto makeadecisionwhethermigratesornot

However,s o m e migration s t u d i e s drew o n thetheory o f investment i n humancapitaldevelopedbyB e c k e r (1975).H u m a n

c a p i t a l t h e o r y assumest h a t individualsinvestinhumanc a p i t a l i n ordertomaximizetheirnetwealth.B e c k e r e m p l o y e d the

,

investmentframeworkprimarilytoanalyzeeducationalattainmentandtherateofreturntoeducationforindividuals

Chiswick(1978)extendedBecker’shumancapitalframeworksubstantially throughitsapplicationtostudyinglabormarketaspectsofimmigration.Thismodifiedhumancapitalmodelhassincebeeninstrumentalinanalyzing

theprocessofimmigrantadjustmentinthehost-countrylabormarket.Chiswick(1978)wasthefirsttoarguethat,forthesame numbero f yearsofschooling,theabilitytoconverts cho o li ng intoearningsmightdifferbetweentheforeign-bornandthenative-

born.Thisargumentimpliedthatimmigrantswouldbeunabletotransfercompletelythehumancapitalaccumulatedintheirhomecountrytothelabormarketofthedestinationcountry.Toanalyzethisaspectofimmigration,C h i s w i c k d e v e l o p e d t h e p h r a s e ‘ i n t e r n a t i o n a

l t r a n s f e r a b i l i t y o f s k i l l s ’ Internationalt r a n s f e r a b i l i t y o f skillscanbeviewedas afunctionofsimilaritiesinthelabormarketsofthehomecountryandthehostcountry,schoolingandlanguagebeingtwoimportantindicators.Schoolinghastwocomponents—anorigin-specificcomponent

7

andaninternationallytransferablecomponent.Th eimportanceofthesetwocomponentsdiffersbythelevelandthetypeofeducationattainedbyimmigrants.Ingeneral,moretheskillsacquiredthroughschoolingintheorigin,greaterthetransferabilitytothedestinationandhencethesmallerthedeclineinvalueofskillsuponmigration.

Researchonmigrationhasanextensiverecordintheeconomicsliterature,startingwithimportantcontributionsby Sjaastad (1962)andmostremarkablyb y theearlyworksofTodaro(1969)andHarrisandTodaro(1970)andthelonglistofauthorswhohavesubsequentlyexpandedontheirframework.AccordingtotheHarris-

Todaro(HT)model,migrationtakesplacefromruraltourbanareasaspeoplecompareexpectedearningsintheurbansectorwiththewagesthattheyearnintheruralsectoranddecidetomoveiftheformerisgreater.Inthisframework,migrationisseenasacost-benefit processandwill

, takeplaceuntiltheexpectednetgainforthemarginalmigrantequalszero

Theburdeno f th e T o d a r o m o d e l w a s t o e x p l a i n w h y m a s s e s o f w o r k e r s m

o v e d fromthecountrysidetothecityinthefaceofsizeableurbanpoolsofunemployedan

d underemployed.Toaccomplishthis,themodelfocusedattentiononthepresentvalueofexpectedearningsratherthancurrentwagerates.Therateofrural-

urbanmigrationwasheldt o beafunctionof thedifference bet wee n t h e p rese nt v a l u

e s o f expectedu r b a n earningsandexpectedruralearnings,withthesizeoftheflowofexpectedurbanearningssignificantlyaffectedbytheprobabilityofobtainingemploymentintheurbanmodern(UM)sector.SupposethatP(t)representsth e probabilityo f securingajobi n theUMsectorinperiodt;YuandYrrepresentaveragerealincomeintheUMandruralsectors,respectively;Cistheone-

timecostofthemove;andristhemigrantstimepreferencerateofdiscount.So,theTodaro’sbasicbehavioralequationcanbeshownas:

o y m e n t isn o n e x i s t e n t T h e r e f o r e , a p r o b a b i l i t y ofu n i t y i s u s e d w h e ncalculatingexpectedruralearnings.

Event h o u g h th er e m i g h t e x i s t anurbanpool o f underemployeda n d unemployedlabor,apotentialmigrantwoulddecidetomakethemovementtowardcityiftheexpectedUMearnings,properlydiscountedbytheprobabilityfactor,exceededtheexpectedstreamofruralearnings.TodarodefinestheprobabilityofbeingselectedforajobduringperiodIasbeingequaltotheratioofnewmodemsectoremploymentopeningsinperiodIrelativetothenumberofaccumulatedjobseekersintheurbantraditionalsectorintimet

TheH

-T m o d e l p r e d i c t t h a t , i n r e s p o n s e t o t h e c r e a t i o n o f e x t r a u r b a n j o b s , additionalrurallaborersattractedbytheincreasedemploymentprobabilitywillswelltheurbanl a b o r forceuntilthenewratioofjobst o urbanl ab or forceisrestoredtotheearlierratio.H o w e v e r, fort h i s a s w e l l asf o r s i m i l a r p a r a d o x i c a l resultst o h o l d , itm u s t b e assumedthattheurbanwagerateisfixed

2.2.2.Relatedt o wagedeterminationa n d wagedifferentials

Int h e h u m a n c a p i t a l t h e o r y , w a g e d e t e r m i n a t i o n h a s b a s e d o

n t h e m a r g i n a l productivityt h e o r y ofwhichlaborcapitaltheoryisanextension.Themarginalproductivityofa w o r k e r isd e t e r m i n e d byher/

hishumancapital.U n d e r c o m p e t i t i v e conditionandperfectlabormovement,wagedifferentialscomefromdifferencesinhuman

9

capitals u c h a s e d u c a t i o n , o n thejobt r a i n i n g I t i s notedt h a t m o r e h u m a n c a p i

t a l w i l lincreasemarginalproductofaworkeror,onotherhand,higherproductivity,andthenhigherwages

Almoststudies,bothofdevelopedanddevelopingcountries,havebeenexecutedtoprovideinsightvi

thehumancapitaltheory.However,accordingtoMincer(1974)andBecker(1975),theoryofhumancapitalpostulatesthatearningsofdifferentcategoriesofworkers,theyaremaleorfemale,blacko r w h i t e , u n i o n i

z e d o r n o n - unionizedd e p e n d o n t h e l e v e l o f h u m a n c a p i t a l endowmentoftheseindividuals.Besideseducationalattainment,jobtrainingandjob’sexperience,partoftheearningsdifferentials,intheshortrun,canalsoresultfrommarketimperfectionssuchasunionsandcollectivebargainingorotherartificialdistortions.Itiscommont o f i n d workersw i t h i d e n t i c a

l b a c k g r o u n d a n d s k i l l s receivingd i f f e r e n t i a l s treatmentintermsofwagesandotherrewards.Thissuggeststhatunobservable personal

,

characteristicsarealsop o s i t i v e l y valued Therefore,thetheoryofdiscriminationhypothesizesthatwagedifferentialscanexitifmarketdifferentiatesandtreatsdistinctcategoriesofworkersonthebasicofrace,genderorothercharacteristics(Becker,1957)

Meanwhile,inhisstudyongenderdifferentialsinearnings,Oaxaca(1973)foundthatthewagedifferentialsrisefromtheeffectsofdiscriminationandtheeffectofindividualcharacteristics.Oaxaca(1973)arguesthatdiscriminationagainstfemalescanbesaidtoexistwhenevertherelativewageofmalesexceedstherelativewagethatwouldhaveprevailedifmalesandfemaleswerepaidaccordingtothesamecriteria.Besides,accordingtoCotton(1988),ameaningfulexplanationofwagedifferentialscanbefoundwhent h e t h e o r i e s o f h u m a n c a p i t a l a n d d i s c r

i m i n a t i o n a r e c o m b i n e d t o g e t h e r T h e resultingcombinationsuggeststhataveragewagesoftwogroupscoulddiffernotonlybecauseofdifferencesin

productivityand skills,butalsobecauseofdifferencesinthetreatmentreceivedbyagroupofworkersagainsttheothergroup,despitelevelofskills

Neumark( 1 9 8 8 ) extendsOaxaca’smethodologyt o deriveanalternativeestimatorofwage-baseddiscriminationbasedontheassumptionthatwithineach laborcategory,theunderlyingutilityfunctionishomogenousofdegreezerowithrespecttolaborinputsfromeachcategory.T h e authoro bse rve s thatthee f f e c t ofdiscrimination i s toredistributewageso n l y w i t h i n e a c h t y p e o f l a b o r a n d t h a t t h e r e s u l t i n g e s t i m a t e

n non— migrantworkersmight

Theoriesofs t a t i s t i c a l discriminationalsoo f f e r af r a m e w o r k foru n d e r s t a n d

i n g the existence ofw a g e gapsbetweenmig r an t and non—mi g r a n t workersbasedo n

t h e lackofinformationorinformationalasymmetries(Arrow,1973; Phelps,1 9 7 2 ) Ifthereisnoperfectinformationoncertaincharacteristicsofimmigrants(forexample,qualityofeducation)orfirmshavelessknowledgeaboutthem,employerswilltendtobasetheirhiringand

paydecisionsonobservablecharacteristicsofw o r k e r s , liket h e ethnicgroup

theybelongto.Anotherinterestingperspectiveo f lookingatthisissueistheideaofmonopolisticd i s c r i m i n a t i o n , whicho c c u r s wh en e m p l o y e r s a r e a b l e t o e x p l o i t m o n o p

h o n y p o w e r ( t h e a b i l i t y o f theemployertoaffectthewagerateofitsemployees)inalabormarket,inspiredbyRobinson’s(1933)workonimperfectmarkets.Forexample,evenwhenmigrantsandnativesa r e equally p r o d u c t i v e ( h a v e equallym a r g i n a l p r o d

u c t s ) , i f thes u p p l y c u r v e f or migrantsi s lesswagee l a s t i c thanf o r natives,t h e p r o f

i t - m a x i m i z i n g

m o n o p o l i s t i c employerwillpaymigrantslower averagewagesthannatives,a l t h o u g hthemigrantsandnatives—

specificmarginalcostsoflaborwillbeequal.Thisoccursbecausetheemployerfacingu p w a r d s

l o p i n g s u p p l y c u r v e s f o r both m i g r a n t a n d n a t i v e w o r k e r s w i l l e m p l o y

thecommonmarginalproduct

Dale-Olsen(2009)suggestthat(apparently)unexplainedwagedifferentialsareassociatedwiththeexistenceofmonopolisticemployersa n d di ff er en t l a b o r supply elasticitya c r o

s s population.O t h e r thingsb e i n g equal,t h o s e c o l l e c t i v e s w i t h m o r e r i g i

d l a b o r s u p p l i e s e a r n l e s s t h a n o t h e r w i s e I f immigrantworkersareemployedinsectorswherefirmshavesomemarketpowerandtheirlaboursupplyislesselasticthanthelocalone(forexample,becauseo f aloweraccesstounemploymentbenefitsandsoon),theirpaywillbelower

InVietnam,Long(2006)showedthatthewagedifferentialsismostlyduetothedifferential

incharacteristicsratherthanreturngaporenvironmentgap.Intheseworkerscharacteristics,educ a tionisthemostimportantelementaccountingwagedifferentials

Meanwhile,usingdatafromInstituteofEconomicsResearchHoChiMinhCityonspontaneousmigrationi n HCMC,Trang(1997)foundthatonlywomanmigrantsa r e discriminated.The incomedifferencebetweenmigrantandnon—

migrantworkersbyfemalesmainlyresultedfromthefactthatfemalemigrant workers

concentrateinlowpaidoccupationsratherthantheyhavelowereducationallevel.Conversely,malemigrantworkersn ot onlyhavehigherp r o d u c t i v i t y b u t also areinadvantageouse m p l o y m e

n t positioncomparedtomalenon—

migrants.Finally,sheassertedthatoneofthemainreasonswhichcontributestotheincomedifferencebetweenmigrant andnon—

12

wageofmalesexceedstherelativewagethatwouldhaveprevailedi f malesandfemales

werepaida c c o r d i n g tothesamecriteria.Heformalizesthisnotionbyproposingt h e conceptofadiscriminationcoefficient(D)asameasureofdiscrimination:

thewagestructureapplicabletothatgroup.Thewageequationtobeestimatedseparatelyforeachrace-sexgrouphasthesemi-logfunctionalform:

where

lipa n d I U aretheaveragehourlywagesformalesandfemales,respectively.Fromthepropertiesofordinaryleastsquaresestimation,wehave:

14

(12)

Thus,equations(11)and(12)representthedecompositionofthewagedifferentialsintotheestimatedeffectsofdifferencesinindividualcharacteristics andtheestimatedeffectsofdiscrimination,respectively

Finally,hefoundt h a t t h e s e x d i f f e r e n t i a l tob e quitelarge.Thee f f e c t s ofdiscriminationareapproximatedbyresidualleftaftersubtractingtheeffectsofdifferencesinindividualc h a r a c t e r i s t i c s f r o m theoverallwage d i f f e r e n t i a l s H o w e v e r , o n e difficultywithhisformulationofthewageequationisthatitcontrolsforwhatmanywouldconsidertobemajorsourcesofdiscrimination.Anotherdifficultywiththeresidualapproachisthat

, itdoesnottakeintoaccounttheeffectsofthefeedbackfromlabormarketdiscriminationonthemale—

femaledifferencesintheselectedindividualcharacteristics

ForwagefunctionsinChina,MengandZhang(2001)findthattherateofreturntoeducationisaround1%higherforruralmigrantsthanforurbanresidents,jobtrainingisimportantforurbanresidentsbutnotforruralmigrants,andmaritalstatusispositivelyrelatedtoruralmigrantsearningsbutnotto

theurbanresidents.Amongthe50%ofthemigranta n d n o n

-m i g r a n t earningsg a p , a l a r g e p o r t i o n o f i t i s l i k e l y t o b e d u e t o discri-mination.However, Yao(2001a)findsthatamongthe1 3 5 % wagegapbetweenlocalsandmigrants,observedvariables(typesoffirms,villagesandcharacteristicsoftheworker)canexplainmostofthem.Foralocalworker,themostimportantwageattributesaremaritalstatusandpoliticalaffiliation,andforamigrantareage,educationandyearsincurrentjob.ThedifferentfindingsontheexplanationsofincomegapofMeng&ZhangandYao,whichconsidersearningstoreflectboththecharacteristicsofworkersandofthe

jobs.M e n g a n d Zhang( 2 0 0 1 ) c o n t r o l o n l y personalc h a r a c t e r i s t i c s a n d Ya o(2001a)

Besidesmigrant/non-migrantw a g e differentials, therealsoexistsectorialwagedifferentialsi n China.G

o r d o n a n d Li( 1 9 9 9 ) giveatheoreticala n a l y s i s thes e c t o r wag e differentials.These

intheformalsector,butisimportantforothersectors;ruralworkexperiencehassignificantpositiveeffectonmigrantwagesintheformalsectorandwage-earnedinformalsector

InV i e t n a m , u s i n g d a t a f r o m c o l l e c t i n g a n d g a t h e r i n g f r o m r e l a

t e d e m p i r i c a l studies,st at ist ic yea r b o o k s a n d from sample s u r v e y inMekon

gD e l t a , T u a n ’ s s t u d y (1996)foundthatthetotalearningsdisparitiesisabout0.9372,inwhichthemaincauseofthewagedifferentialbetweenmigrantsandnon—

migrantsintheMekongDeltaisduetothedifferencesinstructuralfactors.Meanwhile,usingdatafromInstituteofEconomicsResearchH o C h i M i n h C i t y o n s p o n t a n e o u s m i g r a t i o

16

significant.Averageincomeofmigrantsdoesnotdiffermuchfromthatofnon-mi gr an ts a n d femalesignificant.Averageincomeofmigrantsdoesnotdiffermuchfromthatofnon-migrantworkersmainlyresulted f r o m thefactthatfemalemigrantworkersconcentrateinlow-

paidoccupationsratherthantheyhavelowereducationallevel.Meanwhile,malemigrantworkersnotonly

havehigherproductivityrelatedendowmentsbutalsoareinadvantageousemploymentpositioncomparedtonon-

migrants.However,inthestudyofTrangandTuanexitsalimitationisthatnotcorrectselectionbiasinearningsmodel

Pakistan,A t h e r M ( 1 9 9 8 ) r egr ess ed w a g e e q u a t i o n s w i t h a n d w i t h o u t s e l e c t i

v i t ycorrectionareestimatedsourcesofearningsdifferentialsamongmigrantsandnatives.He

17

alsouseswageregressionm o d e l s a s augmentedMincer’s e a r n i n g s equationscontrollingforhumancapitalandvariousothercharacteristics.However,tocorrectforselectivitybias,whichordinaryleastsquare(OLS)maynotbeconsistentbecauseofnon-

randomnessofthesample,theHeckman’stwo-stageapproachisappliedinthestudy

Next,heappliesanOaxaca(1973)wagedecompositiontowagedifferentialsfornativesa n d migrants.I n termso f Oaxaca'sm e t h o d , h i s s t u d y f i n d s thatt h e e a r n i n g s differentialshasbeendecomposedintoamountattributabletopersonal

characteristicsortheendowmenteffect,andthedifferentialattributable tocoefficientsorthestructuraleffect.Theanalysisrevealsthatnearly76percentageofthedifferenceinearningscanbeattributedbythedifferentendowments

Thisc h a p t e r p r e s e n t s definitionsofm i g r a t i o n anda r e v i e w

o f l i t e r a t u r e onmethodologiesforimpactanalysis,namely,theoreticalbackgroundrelatedtomigration,

,

wagedeterminants a n d wagedifferentials The methodologiesf o r impactanalysisareintroducedthroughMincer’swagemodelandOaxaca’swagedifferentialsmethods

TheextendedMincerianearningsmodelisstillwidelyusedtostudyandestimatedeterminantsofw a g e Meanwhile,Oaxaca’s wagedifferentialsmethodisu s e d t o calculatethedistanceofwagebetweenmigrantsandnon-

migrants.Afterexploringandanalyzingmanypreviousstudies,theextendedMincerianearningsmodeland

Oaxaca’swagedifferentialsmethod,whichareproposedasfundamentaltheory,willbespecifiedtoapplyforestimationthewagedifferenceofmigrantandnon-

migrantworkersinHoChiMinhcity,BinhDuongandDongNaiprovinces

18

- CHAPTER3

RESEARCHMETHODOLOGY

Theaimofthischapteristopresentthemethodologya p pl ie d toaddresstheresearchquestions.Thefirstsectionisforspecification

oftheempiricalmodel.Thesecondpartistoexplainspecificvariablesinsuggestedmodels.Thenextpartisforintroductionofdatasource.Thefinalpartpresentsthe estimationstrategyappliedinthisstudy

3.1 Empiricalmodel

3.1.1 Earningsfunction

TheearningsfunctiondevelopedbyMincer(1974),alreadyknownintheliterature,isabenchmarkt oestimatethea v e r a g e privaterateo f returnstoeducationa n d otherfactorsasfollow: