A micro approach to understanding the role of human capital in Vietnam

Abstract

This study sheds light on research issues on human capital (HC) at the micro level, addressing the fact that research on this topic in Vietnam is quite limited and not in- depth. Previous studies have focused on the macro level or relied on simple indicators for measurement. Data for this study are used from the Vietnam Labor Force Survey(LFS), the Thailand-Vietnam Socio-Economic Panel Project (TVSEP), and the Vietnam Household Living Standards Survey (VHLSS). The study pursues three main objectives, that are (1) to analyze the differences in the rate of return to human capital between workers with and without an university degree, (2) to assess the impact of natural shocks on human capital investment in rural households, and (3) to construct a multidimensional human capital index for households. The methods for this research are Propensity Score Matching (PSM), Average Treatment Effects (ATE),Difference-in-Differences (DID) Analysis, and Principal Component Analysis (PCA).The results show that the income gap between workers with and without an university degree is narrowing, natural shocks adversely affect household investment in human capital (education and health), and the multidimensional HC index provides a more different understanding of individual and household well-being. These results are theoretical and practical implications. Policymakers can leverage the results to develop more effective human capital development policies, especially in the context of international economic change. Researchers can build on these results to do further research on human capital in Vietnam. In addition, households can use insights to make informed decisions about human capital development to improve the quality of life.