The Effects of Education and Communist Party Membership on Income in a Transitioning Economy: The Case of Vietnam

Lynne T. Taguchi, University of Washington

The objectives of this study are to understand how education and Communist Party membership affect income in Vietnam as it undergoes a transition from a socialist centrally planned to a market-oriented economy. Market transition theory suggests that as power over resources shifts and new opportunities and incentives are created by market forces, rewards will likely favor education over Party membership. This research utilizes a 1995-1996 sample of 2,965 respondents from the Red River Delta. The results show that higher levels of education of respondents and their fathers are associated with higher income. In contrast, Communist Party members have no significant advantages over non-members. Respondents with fathers who are Communist Party members do better, but this is primarily due to higher levels of education, providing evidence of the greater importance of education in the market economy. These effects differ between wage and family enterprise sectors and between agricultural and non-agricultural enterprises.