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Determinants of wages in the enterprise sector in Vietnam

The development of enterprise sector in Vietnam leads to the formation of labor market for this sector with more jobs created and increasingly higher wages for workers. The purpose of this study is to assess the determinants of wages in the enterprise sector and withdraw policy implications for a sustainable increase in workers’ income in this sector. | TẠP CHÍ KHOA HỌC KINH TẾ - SỐ 7 04 - 2019 DETERMINANTS OF WAGES IN THE ENTERPRISE SECTOR IN VIETNAM Ngày nhận bài 19 08 2019 Ngày chấp nhận đăng 30 12 2019 Đào Thị Bích Thủy ABSTRACT The development of enterprise sector in Vietnam leads to the formation of labor market for this sector with more jobs created and increasingly higher wages for workers. The purpose of this study is to assess the determinants of wages in the enterprise sector and withdraw policy implications for a sustainable increase in workers income in this sector. The empirical study is conducted at the local level with all 63 provinces nationwide in the period from 2008 to 2015. The results reveal that labor productivity quality of labor number of enterprises the share of large enterprises over total number of enterprises business profits and economic growth have positive effects on wages as increases in these factors lead to higher wages. Meanwhile increase in the size of labor force puts downward pressure on wages. The finding also provides strong evidence that the labor market in the enterprise sector in Vietnam is highly competitive when labor wages fluctuate according to the forces of market supply and demand. Keywords Wage determinants competitive labor market. Vietnam s enterprise sector 1. Introduction Enterprise sector takes an important position in an economy as it is a key sector that creates the economy output generates employment and income for workers and is a main source of tax contribution to the government. In Vietnam the enterprise sector is considered as a leader for economic growth since it is more productive than other sectors especially the informal sector which still takes a large part in the economy. Recognize of this the government pays a great attention to the development of the enterprise sector. Perfection of law and legal system such as Corporate and Private Enterprise Laws 1990 to Enterprise Laws 2005 together with series of reforms and policies toward creating an open