Foreign entry in the services sector and gender workforce composition

ABSTRACT

The services sector and multinational corporations have played an increasingly essential role in promoting gender equality and women’s empowerment in labour markets. This paper examines whether the entry of foreign firms into the services sector can affect the gender workforce composition of their domestic counterparts, and to what extent. The empirical analyses utilise a large panel dataset of firms in the labour-abundant economy of Vietnam. The data show a higher proportion of women employed in foreign firms than local ones across two-digit industries and regions. The estimations indicate that foreign entry induces domestic firms to hire women more intensively. Large, state-owned and less capital-intensive firms tend to employ men at a higher rate. Further analyses reveal divergent effects of foreign affiliates. While increased foreign entry strongly stimulates the hiring of women among local firms in male-intensive industries, it exerts an insignificant impact on gender workforce composition in the female-intensive group.

KEYWORDS:

• Gender workforce composition
• foreign entry
• services sector
• Vietnam
• Asia

Acknowledgements

The author would like to gratefully acknowledge the Australian Government’s research funding through an Endeavour Award and data access assistance by General Statistics Office of Vietnam. A sincere thankfulness is devoted to Sizhong Sun, Rabiul Beg, ZhangYue Zhou, Riccardo Welters and Anh The Pham for their valuable suggestions and continued support. The author is also grateful to the constructive feedback on earlier drafts by the two anonymous reviewers, the participants at CBLG Research Seminar (James Cook University), and Measurement and Micro-econometrics Symposium (Griffith University). All errors and omissions remain the author’s.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. For more detailed discussions on gender inequality in Vietnam’s labour market, including inequality between urban and rural areas, see for example Pham and Reilly (2007); Lam and Laura (2016).

2. In certain industries, employers tend to prefer women because of their putative nimble fingers; obedience and being less prone to worker unrest; being suited to tedious work; and reliability and trainability relative to men workers (Elson & Pearson, 1981).

3. Based on geographical, socio-economic conditions, Vietnam is divided into six regions. Red River Delta (including capital city Hanoi) is the political centre, and Southeast (including Ho Chi Minh city) is the economic hub. Central Coast is an emerging region with strong growth in fishing and tourism while Mekong River Delta is highly productive in agriculture and aquaculture. Northern Midland and Mountain has the largest geographical area with expanding activities in mining, quarrying and manufacturing. Lastly, Central Highlands has a high degree of ethnic fractionalisation and features the biggest region for industrial crops, notably coffee.

4. Both foreign and domestic firms in Mekong River Delta show considerably low women to men employment ratios. Indeed, this region has the lowest women’s labour force participation and highest women’s unemployment rate largely due to regional social norms, of which women tend to be more confined to home-based care and housework (GSO, 2017; Nguyen & Sawdon, 2010).

5. Several papers utilise an alternative proxy of women’s employment share (Ahmed et al., 2016; Fakih & Ghazalian, 2015). While the women to men employment ratio is closely linked to the women’s share, the former has an advantage of being unconstrained within the [0,1] interval. In later analyses, gender workforce composition, women’s/men’s employment and gender mix are used interchangeably.

6. Data from GSO’s Labour Force Surveys are utilised to calculate gender pay gap as gendered wages were not included in GSO’s Enterprise Surveys.

7. This standard calculation includes domestic firms’ sales in the numerator and total sales of domestic and foreign firms in the denominator. Hence, it can partly account for the role of foreign firms in determining the index values or the competitive pressure.

8. A gender pay gap ($\mathrm{P}{\mathrm{G}}_{\mathrm{j}\mathrm{t}}$) is also likely to violate the exogeneity assumption. Nonetheless, the test for the orthogonality of this variable allows us to reject the null hypothesis that it is endogenous (C-statistics = 1.4980, p-value = 0.2210). Additionally, later estimations excluding this variable (Models [4] and [5] in Table 4) show the consistent sign of the estimated coefficient of foreign entry ($\mathrm{F}{\mathrm{E}}_{\mathrm{k}\mathrm{j}\mathrm{t}}$). Hence, addressing the endogeneity issue is focused on the key variable of foreign entry.

9. See Nguyen, Sun, and Beg (2019) for the adoption of this IV construction technique in a similar context.

Additional information

Funding

This work was supported by the Endeavour Award, Department of Education, Australian Government [4523_2015].

Notes on contributors

Dao Thi Hong Nguyen

Dao Thi Hong Nguyen holds a PhD in Economics from James Cook University. She has nearly 15 years of professional experience as an economics lecturer and researcher in two institutions of Nha Trang University and James Cook University. Her major research interest focuses on international economics and business, particularly foreign direct investment, spillover effects and implications for workers, firms and industries at host economies.