After the Reforms: Determinants of Wage Growth and Change in Wage Inequality in Vietnam - 1998 -2008

The Vietnam “renovation” reforms were implemented during the 1990s, but their full effect was only felt several years later. We present evidence on the developments in real wage growth and inequality in Vietnam from 1998 to 2008. Wage growth was underpinned by changes in the wage structure (mainly associated with experience group) and residual changes. Growth in productive characteristics (mainly education) contributed to wage growth only at higher points of the wage distribution. Conventional measures of inequality as well as a decomposition of the Gini coefficient show that wage inequality decreased sharply through the 1990s until 2006, but levelled-off subsequently. The main contributors to changing inequality were again education (through the composition effect) and over-time changes in the return to experience. The paper also discusses the possible effects of minimum wage policies on wage inequality in Vietnam.