The informal sector wage gap among Vietnamese micro-firms

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Abstract

Based on unique firm survey data from 2009, this paper examines the wage differential between formal and informal manufacturing household enterprises in Vietnam. Using the Blinder–Oaxaca decomposition method, we investigate whether the wage gap is attributed mostly to differences in observable characteristics (the endowments) between formal and informal firms, or to variations in the returns to these characteristics (the unexplained component). The results show that average wages are 10%–20% higher in formal firms and that the majority of this gap is due to observable characteristics, in particular differences in firm size, workforce characteristics and location. Thus, traditional wage determinants seem to play an important role in explaining the higher wage returns in formal firms.
OriginalsprogEngelsk
TidsskriftJournal of the Asia Pacific Economy
Vol/bind17
Udgave nummer4
Sider (fra-til)560-577
Antal sider19
ISSN1354-7860
DOI
StatusUdgivet - nov. 2012
Udgivet eksterntJa

Bibliografisk note

JEL classification: J31, O17, O53

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