Vietnam has been attracting foreign direct investment (FDI) for 35 years, however, income inequality has become a significant concern. This study aims to explore the connection between FDI and income inequality in Vietnam, considering the influence of education levels across provinces. Using panel data from 63 provinces in Vietnam spanning from 2014 to 2021, the Fixed Effect Model is employed to analyze the data. The study reveals the following key findings: Firstly, contrary to existing literature, it is discovered that FDI directly contributes to a reduction in income inequality in Vietnam. This can be attributed to FDI primarily flowing into the manufacturing and processing sector, which generates employment opportunities, particularly for lower-skilled workers, thereby improving their income levels. Secondly, an increase in GDP per capita is also found to alleviate income inequality, indicating that economic growth plays a role in enhancing income distribution. Lastly, advancements in education are shown to promote the availability of highly skilled workers, enabling them to secure better employment prospects and thus narrowing the income gap.
Table of Contents
Acknowledgment i
Abstract ii
Table of Contents iii
List of Figures iv
List of Tables v
Abbreviation vi
I. Introduction 1
1.1 Foreign direct investment in Vietnam 1
1.2 Income inequality in Vietnam 7
1.3 The objective of this study 10
II. Literature review 13
2.1 FDI and Wage Inequality 13
2.2 The Relationship between FDI and Income Inequality 14
2.3 Income inequality and Education 19
2.4 The Case of Vietnam 20
III.Data and Method 23
3.1 Descriptive analysis data 23
3.2 Variables specified 27
3.3 Methodology 27
IV.Result and Discussion 29
4.1 Result 29
4.2 Discussion 33
V. Conclusion and Envisioning 36
VI. Reference 40
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