. \ UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THEHUGUE VIETNAM THE NETHERLANDS VIETNAM- THE NETHERLANDS PROJECT OF M.A ON DEVELOPMENT ECONOMICS INTERNATIONAL REMITTANCES AND THE EDUCATION OF YOUNG GENERATIONS: THE CASE OF VIETNAM A thesis submitted in partial fulfillment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS BY · TRUONG HQC I<INH TE TP.HCM NGUYEN HAl NGAN HA TIIU VIEN • Academic Supervisor: ) / 3 L DR. PETER CALKINS HO CHI MINH CITY, OCTOBER 2009 ACKNOWLEDGEMENT I would like to express my sincere gratitude to my supervisor Prof. Peter Calkins for his kind support of my Master study and research from initial to final level, for his patience, enthusiasm, encouragement and immense knowledge. His assistance has helped me a lot during the time of designing and writing this research. I am heartily thankful to Dr. Nguyen Trang Hoai, Dr. Nguyen Minh Due and Dr. Tran Tien Khai for their comments and evaluation of my initial research proposal. I also send my gratefulness to Mr. Truong Thanh Vu and Mr. Luong Vinh Quae Duy who help me to deal with VHLSS 2006 dataset and Stata software. Special thanks go to my friends for their support and motivation during my study at the Vietnam -Netherlands Program for M.A in Development Economics. Last but not the least, I would like to thank my family: my parents for giving birth to me, my parents-in-law, my husband and my older brother for supporting me spiritually throughout my life. Finally, I offer my regards and blessings to all of those who supported me in any respect during the completion of the thesis. CERTIFICATION I certify that the substance of this thesis has not been submitted for any degree and is not being current submitted for any other degree. I certify that to the best of my knowledge, any help received in preparing this thesis, and all sources used have been acknowledged in this thesis. NGUYEN HAl NGAN HA Date: 23 October, 2009 ii ABSTRACT Over the last decades, Vietnam has experienced a sharp increase in international remittances inflows from overseas migrants. The total volume of remittances accounts for approximately 6-8% of GDP. Many Vietnamese people have migrated not only with the hope of getting more income and sending more remittances to support their poor families in hometown, but also with the desire to pay school fee for their young generations. By lifting liquidity constraints, remittances raise the educational attainment of young people left behind in receipt countries. The impact of remittances on the education of young generations has been studied in many papers. However, this relationship has not been tested empirically in Vietnam. Therefore, the contribution of this paper is to investigate empirical evidences on the link between international remittances and probability of being enrolled in schools of young individuals in Vietnamese households through exploring data of the Vietnam Household Living Standard Survey 2006 by applying Logit econometric model. Our results show that remittance receipts statistically significantly increase the probability of school enrollment, particular for girls and in rural areas. In addition, this research also finds that the young who have to work tend to gain lower chances to go to schools than their friends without any job. Based on the findings, the author suggests many ways to improve the school enrollment rate of young individuals. Methods aiming at stimulation of remittance income are appropriate such as encouragement of labor exportation programs since Viet Kieu has been getting older and less altruistic as well as lowering cross border money transfer fees. Moreover, when reserved financial budget for young people increases via the effect of attracting more remittance receipts, number of school aged individuals participating in labor market at early ages tends to diminish further. iii TABLE OF CONTENTS CHAPTER 1: INTRODUCTION 1 1.1. PROBLEM STATEMENT 1 1.2. RESEARCH OBJECTIVES 3 1.3. RESEARCH QUESTIONS 4 1.4. RESEARCH HYPOTHESES 4 1.5. METHODOLOGY 4 1.6. RESEARCH SCOPE 5 1.7. THESIS STRUCTURE 6 CHAPTER 2: LITERATURE REVIEW 7 2.1. INTRODUCTION 7 2.2. THE CONCEPT OF INTERNATIONAL MIGRANT REMITTANCES 7 2.3. THEORETICAL FRAMEWORK AND EMPIRICAL STUDIES RELATED TO THE IMPACT OF INTERNATIONAL REMITTANCES ON THE EDUCATION 8 2.3 .1 Theoretical literature 8 2.3 .2. Empirical literature 13 2.4. THE ANALYTICAL FRAMEWORK 18 2.4.1. Empirical model 18 2.4.2. Variables introduction 20 2.5. SUMMARY 21 CHAPTER 3: OVERVIEW OF INTERNATIONAL REMITTANCES AND EDUCATIONAL ATTAINMENT OF THE YOUNG IN VIETNAM 22 3 .1. INTRODUCTION 22 3.2. OVERVIEW OF INTERNATIONAL REMITTANCES IN VIETNAM 22 3.3. OVERVIEW OF EDUCATION OF THE YOUNG IN VIETNAM 29 3.4. SUMMARY 32 iv CHAPTER 4: METHODOLOGY 33 4.1. INTRODUCTION 33 4.2. DATA DESCRIPTION 33 4.2.1. Sampling method and sample size 33 4.2.2. Description of variables 34 4.2.3. Descriptive statistics of variables 36 4.3. STRENGTH AND WEAKNESS OF DATASET 39 4.4. MODEL SPECIFICATION 40 4.5. ESTIMATION STRATEGY 43 CHAPTER 5: EMPIRICAL ANALYSIS 45 5.1. ESTIMATION RESULTS 45 5.2. INTERPRETATION OF THE RESULTS 45 CHAPTER 6: CONCLUSIONS AND RECOMMENDATIONS 51 6.1. CONCLUSIONS 51 6.2. RECOMMENDATIONS 53 REFERENCES 55 APPENDICES 61 APPENDIX 1 61 APPENDIX 2 65 APPENDIX 3 70 v LIST OF FIGURES Figure 2.1 Home Investments in Young generations 9 Figure 3.1 Number of exported workers during 1992-2007 23 Figure 3.2 Percentage of Vietnamese migrant workers by countries 1992- 2006 24 Figure 3.3 Inward remittances from Vietnamese migrants during 2001-2009 25 Figure 3.4 Remittances as percentage of GDP during 1999-2008 26 Figure 3.5 Uses of international remittances(%) 28 Figure 4.1 Distribution of independent variable "remittances per capita" 65 Figure 4.2 Distribution of independent variable "logarithm of remittances per capita" 65 Figure 4.3 Distribution of independent variable "income excluding remittances per capita" 66 Figure 4.4 Distribution of independent variable "logarithm of income excluding remittances per capita" 66 Figure 4.5 Distribution of independent variable "age of young generations" 67 Figure 4.6 Distribution of independent variable "percentage of school-aged children in the household" 67 Figure 4.7 Distribution of independent variable "age of household head" 68 Figure 4.8 Scatter plot of predicted value and standardized Peason residuals 74 Figure 4.9 Scatter plot of predicted value and deviance residuals 74 Figure 4.10 Scatter plot of predicted value and leverage 75 Figure 5.1 Predicted probability of school enrollment by remittances per capita 46 Figure 5.2 Predicted probabilities of school enrollment by remittances per capita and urban-rural areas 48 Figure 5.3 Predicted probabilities of school enrollment by remittances per capita and gender 49 Figure 5.4 Predicted probabilities of school enrollment by remittances per capita and employment status of young generations 50 vi LIST OF TABLES Table 3.1 Flow of international remittances by origin(%) 26 Table 3.2 Percentage of households receiving international remittances 27 Table 3.3 Share of total remittances in urban and rural area 27 Table 3.4 Net enrollment rate in year 2006 by urban rural areas and sex 29 Table 3.5 Average expense on education and training per person in the past 12 months in year 2006 by expense item, urban rural, sex, age group and type of school 31 Table 4.1 Investigated objects 34 Table 4.2 Descriptive statistics of independent variables 37 Table 4.3 Descriptive statistics of dependent variable "Enrollment status" 68 Table 4.4 School enrollment status of young generations by amount of international remittances 38 Table 4.5 School enrollment status of young generations by age group 38 Table 4.6 School enrollment status of young generations by employment 39 Table 4. 7 Description and measurement of variables 40 Table 4.8 Logistic regression results of Model I (full) 70 Table 4.9 Logistic regression results of Model 2 (restricted) 70 Table 4.10 Diagnostic test to compare Model 1 and Model 2 70 Table 4.11 Hosmer and Lemeshow's goodness-of-fit test 70 Table 4.12 Diagnostic test for model specification error 71 Table 4.13 Diagnostic test for Multicollinearity 72 Table 4.14 Logistic regression results of Model 3 (after excluding influential observations) 76 Table 5.1 Estimation results of Logit Model 45 Table 5.2 Marginal effects of explanatory variables on the probabilities of enrollment 76 vii ECV EHPM EMP ENIGH ENROLL FDI GDP GSO HDI HHAGE HHEMP HHGENDER HHSCHOOL IMF INER PC LAMP-DR7 LFS LN INER PC LN RE PC ACRONYMS Encuesta Condiciones de Vida- Quinta Ronda Encuesta de Hogares de Prop6sitos Multiples- National Household Survey. Employment status of young generations Households Incomes and Expenditures National Survey of Institute of Statistics, Geography and Informatics Enrollment status ofyoung generations Foreign Direct Investment Gross Domestic Products General Statistics Office Human Development Index Age of household head Employment status of household head Gender of household head Number of completed school years of household head International Monetary Fund Income excluding remittances per capita Latin American Migration Project-Dominican Republic Survey South Africa Labor Force Survey Logarithm of income excluding remittances per capita Logarithm of remittances per capita viii ML Maximum Likelihood MMP107 Mexican Migration Project MOLISA Ministry ofLabor-Invalids and Social Affairs NLSS Nepal Living Standards Survey ODA Official Development Assistant OECD Organization for Economic Cooperation and Development PER SA CHILD Percentage of school-aged children in household PSLSD Project for Statistics on Living Standards and Development RE PC Remittances per capita SBV State Bank ofVietnam UNDP United Nations Development Program USD United States Dollar VHLSS Vietnam Household Living Standard Survey VND Vietnam Dong WB World Bank ix [...]... institutions serving households 2.3 THEORETICAL FRAMEWORK AND EMPIRICAL STUDIES RELATED TO THE IMPACT OF INTERNATIONAL REMITTANCES ON THE EDUCATION OF YOUNG GENERATIONS 2.3.1 Theoreticalliterature The theory of family behavior The process of children's education attainment has been viewed as one of the aspects of the theory of family behavior (Haveman & Wolfe, 1995) This theory considers one household as... effects of international remittances on the educational attainment may arise if remittances from family members focus on facilitating the migration of other people left behind Kandel and Kao (200 1) argued that migrants' transfer money might produce negative or positive impacts on the attainment of education of family members in the home country depending on the benefits of the education in the host... households' and young generations' s characteristics It is expected to find that remittances statistically significantly influence the probability of being enrolled in schools of young generations The next chapter will present in-depth overview of international remittances and education status of young generations in Vietnam 21 CHAPTER 3: OVERVIEW OF INTERNATIONAL REMITTANCES AND EDUCATIONAL ATTAINMENT OF YOUNG... education level In urban areas, the effect of remittances is 10 times larger than the size of the impact of other financial sources In rural areas, the effect of remittances is about 2.6 times larger than the size of the impact of other kinds of income Estimated results also insisted that parental schooling is one important determinant that significantly influences the probability of leaving school Moreover,... evidences on the right selection of determinants affecting the education attainment of young generations Moreover, the Logit model is applied to investigate the significance and magnitude of the effect of each input factor on the improvement of young 4 individuals' school enrollment rates Upon the analytical results, suitable policies will be suggested and discussed further Cross section dataset from Vietnam. .. level of each child in one Taiwanese household The regression results showed that the background of an individual is very important to their schooling level Children, who obtained higher education level than others, born and growing up in urban areas and had mother and father originating from mainland, and living in families with parents of higher status in income, education and work Gender of household... investigate the influence of international remittance inflows on the status of school emollment of young generations Therefore, the concept of international remittances will be clearly illustrated in section 2.2 Then, theoretical and empirical literature related to the link between international remittances and education will be discussed in section 2.3 Moreover, section 2.4 will be devoted to introduce the. .. determining the education level of young generations However, one of the large disadvantages of Edwards and Ureta (2003) is the methodological problem of failing to consider the potential sample selection and endogeneity of remittance receipts By using a different model compared with Edwards and Ureta (2003 ), Borraz (2005) tried to explore relationships between international remittances and education ofyoung... out-migration family members Then, they compare the results using non-migration households with ones using all households in the sample and conclude about the differential impact of remittance receipt and migration on the likelihood of the education of young people Remittances significantly lead to higher school attendance for all young generations in the community which is full of private and public schools... variable, recoded 1 if the child is currently working, vice versus recoded 0 if the child is not currently employed 2.5 SUMMARY This chapter presents the review of theoretical and empirical literature related to the determinants of young generations' s education attainment, motivate to remit and the link between international remittances and education of young generations In addition, the suggested analytical . INTERNATIONAL REMITTANCES AND THE EDUCATION OF YOUNG GENERATIONS: THE CASE OF VIETNAM A thesis submitted in partial fulfillment of the requirements for the degree of MASTER OF ARTS. TO THE IMPACT OF INTERNATIONAL REMITTANCES ON THE EDUCATION OF YOUNG GENERATIONS 2.3.1 Theoreticalliterature The theory of family behavior The process of children's education. . UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THEHUGUE VIETNAM THE NETHERLANDS VIETNAM- THE NETHERLANDS PROJECT OF M.A ON DEVELOPMENT ECONOMICS