LVV THESIS RATE OF RETURN FOR HIGHER EDUCATION IN VIETNAM COMMENT

RATE OF RETURN FOR HIGHER EDUCATION IN VIETNAM: A DISCIPLINE BASED COMPARATIVE ANALYSIS CHAPTER 1: INTRODUCTION 1.1 Research rationales Higher education in Vietnam has been highly appreciated by the public as well as policy-makers as a bachelor degree is believed to be a competitive advantage for future career On the other hand, college education is a priority of Vietnamese government To realize their ambitious plan of having one top-200 university and 20,000 PhDs by 2020, Vietnam has spent nearly one percent of their GDP on higher education, compared to 0.15%, 0.53% and 0.32% for Myanmar, Indonesia and the Philippines, respectively (UNESCO, 2014) This paper takes human capital theory as the foundation It considers individuals, not governments, as the investors in education It is an individual who chooses to continue schooling or not So, one popular question that has been asked by many universities and college students is: Is university education a good investment? The current boom of colleges and universities has raised doubts on the quality of higher education in Vietnam According to Valley and Wilkinson (2008), Vietnam lacks even a singly university of recognized quality, and about half of Vietnamese university graduates are unable to find jobs in their area of specialization Hence, it is necessary to make an investigation on rates of return to Vietnam college education based on comparative analysis of students’ majors 1.2 General Objectives This thesis considers education as human capital investment and is designed to estimate the average rate of return to university/college education in Vietnam, from which assess its impact on individual career path and propose some possible recommendations 1.3 Specific Objectives  Estimate the average rate of return to a university degree in Vietnam with comparative analysis using Mincer method  Compare and contrast the estimated rate with previous studies and with other countries  Provide a theoretical estimation model for rate of returns and based on that, to propose some recommendations and suggestions for higher education in Vietnam 1.4 Thesis Structure Chapter 1: Introduction The first chapter provides background of the research topic, the benefits and significance of this research, research questions, research objectives, and research scope and the structure of this thesis Chapter 2: Literature Review To build a theoretical framework for this research, this chapter presents the relevant literature on the Vietnamese educational, the human capital investment as well as point out the relation between rate of return and wage regression Chapter 3: Data and Methodology This section presents the research designs with quantitative approach, establishing hypotheses, and introduces sampling approach to support data collection In addition, the chapter also provides a detailed description of the data used in this research, and data analysis methods Chapter 4: Finding and Analysis This part indicates the main findings after calculating the rate of return to college education in Vietnam It also seeks to compare and contrast with previous studies and with other countries, from which provides further discussion regarding these findings Chapter 5: Implications and Recommendations The final chapter generalizes the main conclusion as a summary of previous results and findings It also proposes some recommendations, limitations of this study, and suggestions for researches in the future CHAPTER 2: LITERATURE REVIEW 2.1 General Overview of Vietnamese Higher Education 2.1.1 Overview on Vietnam Education System Vietnamese educational system consists of levels, from pre-school education to the doctoral level Pre-school education is the first level which includes nursery and kindergarten with the duty to organize the nurturing, care and education of children aged between three and six years old Compulsory education lasts 12 years and is divided into levels: primary (5 years), secondary (4 years) and high school (3-4 years) For high school level, there are types: upper secondary (3 years) and professional secondary (3-4 years), along with vocational training centres in short-term (less than year) or long-term (1-3 year) Students need to complete compulsory education to enter higher education including universities, colleges or academies After graduating from universities, individuals can attend post-graduate education to get the master degree (2 years) or doctor of philosophy (2-4 years) Accordingly, university education is the higher education and not compulsory However, with the high requirement for higher-qualified human resource, a college degree is important for learners to find a good job in the future Students who graduate from high school and desire to participate in the university are obliged to take an entrance exam The entrance exam is held annually over the country in Mid-July Candidates are of all ages, religion, ethnicity and nationality The result of the exam will be widely publicized on the mass media Candidates who have questions about their results have the right to applying for verification Those who get the benchmark or more are eligible for entering school The curriculum of higher education in Vietnam last from four to six years In the first years, the curriculum is general program The rest years are the time for specialized subjects or practicing After graduation, students are granted with a degree of bachelor, engineer, and architect or doctor equivalent to their majority in the university No matter what the majority is, students are required to take part in the subject of national defense and security 2.1.2 Higher Education System in Vietnam According to General Statistics Office of Vietnam (2017), there are more than 235 universities and colleges in Vietnam (excluding military universities), of which 235 are public and accounts for about 80% Public university education consists of national universities (which are more prestigious, receive more State investment and generally have greater autonomy), universities under Ministries (such as Academy of Finance, Ho Chi Minh Academy of Politics, etc.), regional universities and universities under People’s Committee of provinces University-level programs also occur at senior colleges and institutes, which generally have a narrower subject-matter focus Regarding the development of the number of higher education institutions, in the period from 2006 up to now, there have been 79 newly established and upgraded higher education institutions, bringing the total number of higher education institutions in the current system to 235 Vietnam higher education currently consists of 170 public universities, 60 private universities and 05 universities with 100% foreign capital, including 61 pedagogical universities and multi-disciplinary schools with teacher training Figure 2.1 Development of Vietnam higher education system In terms of the network structure by ownership type, although the number of nonpublic universities has continuously increased over the years, the role of private institutions in the development of higher education system is still limited The Commented [T1]: Source???? Nếu em cập nhật thêm website giáo dục có số liệu cập nhật số lượng trường đến nay, bổ sung vào percentage of non-public higher education institutions and 100% foreign-owned institutions in our country account for a low rate of 27.7% compared to some countries in Asia such as Malaysia (about 52%), Korea (about 80%) Figure 2.2 The structure of Vietnam higher education system In terms of students and majors, for the period 2006-2016, total number of fulltime students in higher education institutions nearly doubled and reached 1,767,879 students in the year 2016-2017 However, the scale of higher education at non-public universities is 243,975 students, accounting for only 13.87% of total students nationwide, much lower than the Government’s targets Regarding the structure of sectors and majors, the percentage of vocational students allocated by 07 sectors is: science education and teacher training (11%), social sciences and humanities (16%); transport technology, engineering, construction (32%); Business, Law Management (30%) Commented [T2]: Tương tự Figure 2.3 Number of students in the university majors Regarding quality assurance conditions, some higher education institutions have made great efforts in expanding campuses, strengthening facilities and equipment, along with developing managerial staff and lecturers organic A number of Vietnam universities have been included in the regional university rankings, initially affirming the university's prestige and brand in training, scientific research and international cooperation In terms of quality accreditation, up to now, there are 118 higher education institutions that have met the accreditation standards according to Vietnam’s education quality testing standards and accredited institutions by international standards, accounting for 52% of the total number of higher education institutions (GSO, 2018) 2.2 Literature review on rate of return to higher education The returns to education have becomes relevant issue for developing countries It has confirmed that better-educated people are receiving higher wages rather than lesseducated people (liệt kê tên nghiên cứu đề cập tới mệnh đề này) They also have better occupations and higher status compare to people in low educational achievement Additionally, the higher educational level attainment of workers might help to develop new technology in order to increase total factor productivity It is supported by a variety of related studies as follow: Comola and Mello (2011) used household survey data in order to estimate the determinants of incomes in Indonesia The result from their study showed that incomes Commented [T3]: Phần tổng quan ngắn Tổng quan em cần tổng quan rate of return to higher education (khái niệm) có nhiều quan điểm khác nhau, tổng quan phương pháp đo lường, sau tổng quan nghiên cứu thực nghiệm theo ngành kết Cuối cần có phần nội dung đánh giá tổng quan: Các nghiên cứu review cho em khung lý thuyết gì, cịn chưa đề cập đến vấn đề gì: cụ thể em lựa chọn khái niệm rate of return gì, phương pháp em lựa chọn để ước lượng, em ước lượng kết (mục tiêu) VN increase regarding to educational attainment and age, and there were differences between men and women salaries It indicated that women are salaried less than men Moreover, their study in 2010, used household survey data in 2004 to estimate the determinants of earnings in Indonesia The data contains 75.371 households or 237.920 individuals were measured and available only for salaried workers The result indicates that educational achievement seems to be a dominant forecaster of labor-market outcomes The members of better-educated households suggest not to accepting low quality non-salaried works (Comola and Mello, 2011) Harberger and Guillermo-Peon (2012) did a study on the relationship between education and incomes in Mexico The study compares the benefits of higher education to lower level education or high school graduated They used data from ENOE, a survey that published quarterly by the National Institute of Statistics and Geography or INEGI in Mexico for second quarter of 2010 The result showed strong support for net present value and internal rates of return to investment regarding to sequential steps up the educational hierarchy In addition, Purnastuti (2012) used data from Indonesia Family Live Survey (IFLS) wave IV to estimate the private rates of return to education in Indonesia The study used ordinary least squares and Mincer model The result showed that one year of schooling rises an individual’s wages by 5,66 percent Further, study showed there was a gender asymmetry in private economics returns to education between men and women It indicated returns to women’s education being statistically significantly higher than men’s education Akguc (2010), study on cross-country panel estimations of the returns to the stages of education in primary, secondary, and tertiary using production function in the Mincer model way in order to achieve log-linear equation The data used dataset on education, output, and capital stock that offered by Cohen and Soto in 2007 The result indicated that the fixed effects estimates income significant and positively retained effects for primary, secondary, and tertiary of schooling on output per worker It also showed that tertiary education tends to be the most dominant type of schooling rather than primary and secondary schooling It supported by significant effect on aggregate wage per capita for the range of 11.2 % to 13.2 % From empirical result, the education has strong correlation with the educational attainment It is indicated that higher education tends to be the most significant type of education rather than primary and secondary level of education It also showed significant effect on aggregate salary per capita 2.3 Literature review on choice of college major Concerning the choice of college major, there is a significant amount of empirical evidence suggests that earnings potential affects individuals’ choice of college major (Berger, 1988; Willis and Rosen, 1979; Zarkin, 1985) There is less definitive evidence on the extent to which lifetime earnings considerations factor into college major choices, though, as suggested above, it is clear that there are significant differences in rates of return according to one’s major (Carnevale et al., 2012), and recessions and economic fluctuations can have significant and persistent effects on new college graduates that depends, in part, on the major with which they enter the labor market (Oreopoulos et al., 2012) In addition to that, empirical evidence tends to suggest that the influence of future earnings on college major decisions may be quite small, with the choice of major more driven by the consumption value of different fields (Arcidiacono et.al, 2012; Beffy et.al, 2012; Wiswall and Zafar, 2013), field-specific aptitudes (Arcidiacono et.al, 2012; Stinebrickner, 2014; Freeman and Hirsch, 2008), or the pricing of particular majors (Stange, 2012) The primacy of consumption value appears to hold even in situations where particular majors are known to be strongly linked to certain occupations (Alstadsaeter, 2011) Work that focuses on connecting field of study to potential future earning generally relies on strong forecasting assumptions Accordingly, Berger (1988) estimates the relationship between a college student’s predicted future earnings and choice between five broad fields of study In models that attempt to correct for self-selection bias, assuming individual ability and cohort affects earnings but not college major, he finds evidence suggesting that students are likely to choose majors that offer greater lifetime earnings streams Similar to Berger, Beffy et al (2012) estimate the relationship between expected earnings and college major across broad fields of study, and they attempt to account for self-selection by exploiting variations in the relative earnings returns induced by the business cycle They find heterogeneous responses to changes in anticipated earnings and conclude that the elasticities of major choices are modest and primarily driven by non-pecuniary factors Currently, Vietnam higher education system consists of 07 main sectors, which is a collection of one or some fields of education and training level II in the list of education and training of the national education system promulgated by the Prime Minister; and 70 majors, including science education and teacher training, social sciences and humanities, transportation technology, engineering, construction, Business, Law and Management, etc (Ministry of Education and Training, 2018) According to General Statistic Office (2018), university majors can be divided into 24 groups, including: Science education and teacher training; Art; Humanities; Social and behavioral sciences; Press and information; Business and Management; Law; Human science; Natural sciences; Math and statistics; Computers and information technology; Production and processing; Architecture and construction; Agriculture, forestry and fishery; Veterinary; Health; Hotels, tourism, sports and personal services; Military and Defense, etc Commented [T4]: Cái để sang phương pháp nghiên cứu CHAPTER 3: DATA AND METHODOLOGY 3.1 Data sources This paper examines the rate of return to university education based on and Vietnam Household Living Standard Survey 2016 (VHLSS 2016), which was taken by General Statistics Office of Vietnam The VHLSS 2016 was conducted nation-wide with a sample size of 46,995 households in 3,133 communes/wards which were representative at national, regional, urban, rural and provincial levels (General Statistic Office of Vietnam, 2016) It provided an up- to-date source of data on households to be used in policy design, monitoring of living standards and evaluation of policies and programs The survey collected information during four periods, each period in one quarter from the first quarter to the fourth quarter in 2016 through face-to-face interviews conducted by interviewers with household heads and key commune officials in communes containing sample enumeration areas Large sample size, on the one hand, offers more precise estimates On the other hand, that facilitates separate analyses on specific sub-populations, such as informal workers In fact, VHLSS 2016 contained necessary information for the identification of internationally-defined informal sector and informal employment 3.2 Methodology In this research, we use Mincer model to estimate salary regression It shows the statistical relationship among market salary, duration of education, and experience The description of the earnings function used is based on the human capital model elaborated by Mincer in 1974 It showed that employee who joined school longer would earn higher salary regardless of their level of educational attainment It needs comparisons of earnings through individuals with different levels of educational achievement would estimate the return to education (Krueger and Lindahl, 2000) By following Mincer model, we estimate the return to education by using natural log of individual salary as follow: where: ln Wi = natural log of individual salary i Si = duration of education Xi = experiences (years)
 Xi2 = quadratic of Xi ℇ = error term In order to provide more precise results, several variables could be added to this function:  Gender: This variable represents the gender earnings discrimination between male and female  Region: It is divided by urban and rural areas in Vietnam  Marital status: This variable represents the difference between married and single marital statuses  Industrial classification: Higher salaries are paid for people working in higher standard sectors CHAPTER 5: IMPLICATIONS AND RECOMMENDATIONS 5.1 Reformation of low-tuition policies An important issue in education finance is that who should play a major role in higher education finance In Vietnam, it is often argued that the government should play a major role in financing education and provide capitals for the public and private sectors This is the basis for educational planners to discuss which method would be best suited to finance education in Vietnam It is suggested that the Government should determine the optimal method of funding for higher education in Vietnam The results of this study indicate that the rate of returns of the graduates from public university is much higher than that of private university graduates Furthermore, the students in public sectors also receive more economic benefits than those in private sector Hence, it is proposed that the Government should promote investments for higher education in the public sector and support these institutions to make lower tuition policies, giving priority to students in public universities In addition, research also shows that higher education plays an important role in increasing job opportunities Higher education has helped select and categorize individuals with different qualifications, providing information to employers to hire or redistribute income between skilled and non-skilled labors Besides, the findings and results also reflect that public college and university graduates are certainly given more job opportunities with larger companies than graduates from private colleges and universities For example, the percentage of public university graduates employed by large companies is almost 3.5 times higher than that of private university graduates Nearly half of private sector graduates are often required to apply for jobs in small companies, while only one fifth of public university graduates are employed by these companies This demonstrates that the public university diploma seems to play an important role in individual job selection 5.2 Increasing opportunities to transfer within higher learning institutions It is common that students not have the opportunity to transfer from one institution to another in the higher education system in Vietnam Once students have entered a university, they must study there until graduation In addition, individuals who not attend the semester, admission to higher accredited universities will not have the opportunity to study at any equivalent institution, regardless of their academic achievement at the school This problem leads to inequality in education opportunities for people in Vietnam, and may eventually lead to economic inequality Therefore, it is important to emphasize the need for a transfer process within higher learning institutions, which will provide an opportunity for a student to move from one institution to another, depending on the needs of students 5.3 Separation of Loanable Funds to Individuals Highly significant statistical differences in the estimates of rates of return were found for higher education in Japan, not only between private and public sectors, but also between liberal arts and science degrees Based on these results, another major recommendation for educational policy is the adoption of a dual system of subsidizing individuals in the private sector according to different types of degrees The Vietnamese government established the Scholarship Foundation as the governmental agency which had as its prime objective to lend money to college students Students qualifying academically and financially, according to foundation requirements, receive loans In spite of the fact that this foundation has greatly contributed to developing higher education in the postwar period in Vietnam, this foundation has one severe disadvantage; it has provided loans to individuals not according to their need, but mainly according to their academic superiority There has been a tendency for individuals in the public sector to be granted loans more readily than those in the private sector The results of this study indicate that persons who are recipients of public higher education tend to have a remarkable economic advantage, a high private rate of return based on both the low cost of education and the high probability of obtaining a high paying job In view of the economic advantage that exists for individuals who have attended or are attending a public institution, the policy for selection used by the Scholarship Fund would seem to perpetuate the inequalities already present within the higher education system Therefore, the criteria for approving applicants should be reevaluated The following system of making loans to students could be considered in the selection process: First of all, students’ economic needs should carry more weight than scholastic ability; second, graduates of private higher education should be granted more time for repayment of loans, and third, loan amounts should be greater for those pursuing degrees in science at private institutions REFERENCES Alstadsater, Annette, 2011 Measuring the consumption value of higher education CESifo Economic Studies, 53: 458 Arcidiacono et.al, 2012 Modeling college major choices using elicited measures of expectations and counterfactuals Journal of Econometrics, 166 (1), 3–16 Beffy et.al, 2012 Choosing the field of study in postsecondary education: expected earnings matter? Review of Economics and Statistics, 94 (1), 334–347 Berger, Mark C., 1988 Predicted future earnings and choice of college major Industrial and Labor Relations Review, 41, 418–429 Blundell, R et al., 2005 Human Capital Investment: The Returns from Education and Training to the Individual, the Firm and the Economy Fiscal Studies, 20(1), pp.1– 23 Carnevale, Anthony P., Cheah B., and Jeff S., 2012 Hard times, college majors, unemployment and earnings: not all college degrees are created equal Georgetown University Center on Education and the Workforce General Statistics Office of Vietnam Statistics of universities and college education Available at: https://www.gso.gov.vn/ [Accessed May 27, 2019] General Statistics Office of Vietnam, 2016 Result of Vietnam Household Living Standard Survey 2016, pp 11 Jeff Olson, William Ferreira & Eddie O'Shea, 2018 Vietnamese higher education: Opportunities and challenges www.hoganlovells.com Available at: https://www.hoganlovells.com/en/publications/vietnamese-higher-educationopportunities-and-challenges [Accessed May 26, 2019] Harberger, Arnol C and Guillermo-Peon, Sylvia, 2012 Estimating Private Returns to Education in Mexico Journal of Economics, Vol 49 No 1, pp 1–35 Heckman, James J., Lochner, Lance J., and Todd, Petra E., 2003 Fifty Years of Mincer Earnings Regressions National Bureau of Economic Research Working Paper No 9732, National Bureau of Economic Research, Inc., May Hoan, P.X & Nha, P.X., 2013 Return on Investment in Tertiary Education and Tuition Policy in Vietnam Journal of Economics Development, 216, pp 41–53 Krueger, Alan B., and Lindahl, Mikael, 2000 Education for Growth: Why and For Whom? 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Vietnam higher education system consists of 07 main sectors, which is a collection of one or some fields of education and training level II in the list of education and training of the national education. .. accounting for 52% of the total number of higher education institutions (GSO, 2018) 2.2 Literature review on rate of return to higher education The returns to education have becomes relevant issue for. .. etc (Ministry of Education and Training, 2018) According to General Statistic Office (2018), university majors can be divided into 24 groups, including: Science education and teacher training;