Heterogeneous Firms in International Markets and Gender Inequalities: New Evidence from Vietnam

ABSTRACT

Recent contributions in international economics have highlighted structural differences between firms actively participating in global markets and firms mostly operating in the domestic economy. Using firm-level data from Vietnam, this study found that foreign and domestic firms with global ties – exporters, multinational enterprises (MNEs), and domestic firms belonging to global value chains (GVCs) – play an important role in reducing gendered differences in employment opportunities in the formal sector, in particular for low-skilled women workers. Women workers are more likely than men workers to be employed in low-wage firms, but this gender gap is lower in MNEs, in particular those belonging to GVCs. This study provides evidence of important within-sector heterogeneity not only based on firms’ ownership but also on the intensity of participation in GVCs.

HIGHLIGHTS

• Global economic interactions can shape gender inequalities in the labor markets of developing countries.

• In Vietnam, firms with complex global networks promote a more gender-balanced development trajectory.

• Foreign and domestic firms participating in global value chains boost employment opportunities but mostly for low-skilled women.

• Firms’ participation in international markets has limited effects on the reduction of gender inequality in wages.

KEYWORDS:

• Gender inequality
• FDI
• global value chains
• globalization
• Vietnam

JEL Codes:

• F23
• F16
• J16

SUPPLEMENTAL DATA

Supplemental data for this article can be accessed at https://doi.org/10.1080/13545701.2022.2056224.

Notes

1 By “peripheral” position in a GVC, we mean specialization in tasks of the production process that are distant from final consumption and concentrated in production phases, which add limited value to the final goods.

2 A MNE is defined as a firm having at least 10 percent of foreign ownership, which is in line with Fourth Edition of the OECD Benchmark Definition of Foreign Direct Investment.

3 Elhanan Helpman et al. (2017) explained the high wage dispersion observed within sectors on the basis of trade participation as well as firm size.

4 For a literature survey on heterogeneous firms and international trade, see Marc J. Melitz and Stephen J. Redding (2014).

5 VIIS (2010) is the representative of the population of firms based on ownership. More details on the data collection and on the sectoral dimension are reported in the Online Appendix.

6 We focus on full-time workers as the use of part-time workers is relatively limited in the firms included in VIIS data.

7 The Online Appendix (Figure A1) shows the distribution of female employment across sectors by type of firms.

8 Linear models may entail problems of interpretation because the predicted values from an OLS regression are never guaranteed to lie in the unit interval, especially when values are observed close to the boundaries.

9 Fractional response regression is the appropriate method when the dependent variable is a fraction (see Papke and Woodridge 1996).

10 When information is available, we use variables measured one financial year before to address possible endogeneity bias coming from the simultaneous determination of factor use by the firm. In some estimations, we also use the dummy Exporter, equal to 1 when the firm has a positive value of exports, and o otherwise (see Table A4, Online Appendix).

11 The exact definition of these variables is summarized in Table A2 (Online Appendix), where we have reported the distribution of domestic and MNEs in the different categories. Robustness analysis, available upon request, has been performed on different thresholds employed for the firm classification.

12 Note that, SOE firms are included in the set of dummies of domestic firms. This was due to the very low number of SOEs for each GVC participation category, which does not allow robust estimates of the coefficients.

13 This data set uses. See Table A3 in the Online Appendix for the detailed list of the sub-sectors (2-digit level of ISIC Rev).

14 The difference between exporters and non-exporters (extensive margin effect) can be better appreciated in Table A4 in the Online Appendix where we include a dummy variable ‘exporter.’ The results show a consistently higher propensity of exporters to hire women workers at all skills levels.

15 The vocational training variable is measured as the share of graduates having vocational training over the untrained laborers. The trained workforce variable is measured as the share of trained workers over the population of 15 years and above. See Table A1 in Online Appendix for details.

16 Figure 1 is based on the estimations presented in Tables 4 and 5. In Figure 1, the dotted lines correspond to the 5 percent significance level. The marginal effect is statistically significant when the dotted lines are both above or below the 0-level line.

17 The higher wages paid by MNEs as compared to domestic ones may be due to the positive selection of workers with higher abilities by the former. Due to data constraints, this analysis cannot explicitly control for worker’s abilities as done in papers using matched employer-employee datasets and that are generally unavailable for developing economies (see, for example, Andrews et al. 2009).

18 The results of the estimations are not displayed in Table 5. They are available upon request.

Additional information

Notes on contributors

Nicola Daniele Coniglio

Nicola Daniele Coniglio (PhD University of Glasgow) is Associate Professor in Economic Policy at the University of Bari (Italy). Nicola conducts teaching and research activities in the following areas: human capital and development, international trade and factor mobility, the economics of migration, urban and regional economics. Nicola is an international expert for UNIDO, associate editor of Journal of African Development, and director of the Erasmus Mundus Master Programme in “Economics of Globalisation and European Integration” run by a consortium of European and non-European Universities.

Rezart Hoxhaj

Rezart Hoxhaj (PhD University of Bari Aldo Moro and University of Lille, France) is Marie Sklodowska Curie Fellow affiliated with the Department of Economics and CESSMIR at Ghent University. He is an economist whose topics of interest are development economics and international factor mobility, particularly migration and FDI. His current research in the migration domain explores immigrants’ expectations, skilled immigration, and integration/assimilation in terms of education at destination.