UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE EFFECTS OF HOUSEHOLD’S CHARACTERISTICS ON EDUCATION EXPENDITURE IN VIETNAM BY HOÀNG HƯƠNG GIANG MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, DECEMBER 2014 UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS THE EFFECTS OF HOUSEHOLD’S CHARACTERISTICS ON EDUCATION EXPENDITURE IN VIETNAM A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS BY HOÀNG HƯƠNG GIANG Academic Supervisor: DR TRẦN TIẾN KHAI HO CHI MINH CITY, December 2014 DECLARATION This is to certify that the thesis entitle “The effects of household’s characteristics on education expenditure in Vietnam”, which is submitted by me in partial fulfillment of the requirement for the degree of Master of Art in Development Economic to Vietnam – The Netherlands Program The thesis comprises only my original work and due supervision and acknowledgement have been made in the text to all materials used Hoàng Hương Giang i|Page ACKNOWLEDGEMENT I would like to thank the great assistance of my supervisor, Dr Trần Tiến Khai, who has given me valuable comment, important advices me to complete this thesis Besides, I sincerely thank all lectures in Vietnam – Netherlands Programme for their dedicated instruction and all the courses during the study In addition, I would like to thank all the academic and technical staffs of the Vietnam – Netherlands Programme for supporting during the course I also would like to thank my family, especially my mother and my husband, who motive my effort and support me a lot to finish my study Finally, I would like to thank my classmates, Ms Linh and Mr Quang, who has supported me to complete this work ii | P a g e ABBREVIATION GSO General Statistics Office OLS: Ordinary Least Square VHLSS: Vietnam Households Living Standard Survey VND: Vietnam Dong UNESCO: United Nations Educational, Scientific and Cultural Organization iii | P a g e ABSTRACT Collecting 4636 observations at household level from VHLSS 2012, this study aims to investigate the effects of current resources of family on education expenditure ratio for children in Vietnam The findings of the study provide the whole context of the education expenditure situation in six regions of Vietnam as well as in urban and rural Besides, it is demonstrated that socio-economic status is the key indicators to education expenditure ratio Particularly, household’s income and education level of household head positively effect on the ratio Beside, the occupation of household head is associated with education expenditure ratio for children In addition, the correlation between demographic factors and education expenditure ratio is also analyzed Accordingly, the findings indicate that education expenditure ratio is associated with gender of household head In fact, families whose household head being mother have higher ratio than those whose household head being father Similarly, the education expenditure ratio of families being the Kinh is also higher than those being other ethnic minority groups Finally, the correlation between higher education expenditure ratio with higher number of schooling children confirms the fact that size of family is one the key factor influencing on education achievement of children Especially, the findings provide that the education expenditure ratio for the boys and the girls are relatively equal in Vietnam Furthermore, the policy recommendations relating to education expenditure were also drawn from findings to deal with the remaining disadvantages Key words: current resources, education expenditure ratio, VHLSS 2012, socioeconomic, demographic factors, regions, policy iv | P a g e TABLE CONTENTS CHAPTER INTRODUCTION 1.1 Problem Statements 1.2 Research Objectives 1.3 Research Question 1.3 Research Organization CHAPTER LITERATURE REVIEWS 2.1 Definitions 2.1.1 Education definition 2.1.2 Education expenditure 2.2 Theoretical reviews 2.2.1 Theory of Demand 2.2.2 Human Capital Theory 10 2.2.3 Integrated investment and consumption motives in a Neoclassical Model of demand for education 11 2.3Empirical studies 13 2.3.1 Effect of family backgrounds on education of children 14 2.3.1.1 Effect of Parental backgrounds on education of their children 14 2.3.1.2 Effect of demographic factors on education of children 16 2.3.1.3 Effect of geographic factors on education of children 18 2.3.2 Empirical researches on determinant on education expenditure 19 2.3.2.1 Determinant on education expenditure in rural India 19 2.3.2.2 Determinant on education expenditure in China 20 2.3.2.3 Determinant on education expenditure in United State 20 2.3.2.4 Determinant on education expenditure in Vietnam 21 2.4 Chapter summary 23 CHAPTER DATA AND RESEARCH METHODOLOGY 3.1 Data descriptions 24 3.1.1 Data Source 24 3.1.2 Data Descriptions 24 3.2 Hypothesis 26 3.2.1 Socio – Economic Factors 26 3.2.2 Demographic factors 28 3.2.3 Geographical factors 29 3.3 Method and Estimation Strategy 31 v|Page 3.3.1 Variables 31 3.3.1.1 The dependent variable 31 3.3.1.2 The independent variables 31 3.3.2 Estimation strategy 33 3.3.2.1Tobit setup 33 3.3.2.2Empirical model 34 CHAPTER EMPIRICAL RESULTS AND DISSCUSION 4.1 Education expenditure between regions of Vietnam 37 4.1.1 Expenditure ratio of education and of other goods 37 4.1.2 Education expenditure by education level of children 39 4.1.3 Education expenditure by gender of children 41 4.1.4 Education expenditure in urban and rural areas 43 4.2 Education expenditure by parents’ backgrounds 43 4.2.1 Education expenditure by education level of household head 43 4.2.2 Education expenditure by household head’s occupation 45 4.2.3 Education expenditure ratio by gender of household head 45 4.3 Tobit estimation 46 4.3.1 Estimation results and discussions 46 4.3.1.1 Effected by socio –economic factors 48 4.3.1.2 Effected by demographic factors 49 4.3.1.3 Effected by geographic factors 50 4.3.2Testing for regression 51 4.3.2.1Testing the significant of coefficients simultaneously for regressions51 4.3.2.2Heteroscedasticity test 52 CHAPTER CONCLUSION AND POLICY IMPLICATION 5.1Conclusion remarks 53 5.2Policy implications 54 5.3Limitation of the study and recommendation for future researches 55 REFERENCES 57 vi | P a g e APPENDIX Appendix 1: Matrix of correlation between variables 61 Appendix 2: Wald test of overall significance of the model 61 Appendix 3: Robust estimation of Tobit 62 Appendix 4: Tobit estimation result (schooling boy and schooling girl) 62 Appendix 5: Tobit estimation result (schooling age 63 Appendix 6: Tobit estimation result (boy and girl at schooling age) 63 Appendix 7: Distribution of education expenditure ratio 64 Appendix 8: Average income by region 64 vii | P a g e LIST OF TABLES Table 3-1: The Observation proportion by regions 25 Table 3-2: Dummy variables 26 Table 3-3: Schooling age and enrollment rate between regions 30 Table 3-4: Statistical description of determinant household characteristics factors on education expenditure 36 Table 4-1(a): Expenditure ratio of education, Health care and Foods by regions38 Table 4-1 (b): T-test for mean of education expenditure ratio by regions 38 Table 4-2: Education expenditure ratio by primary, secondary, and high education level by regions 40 Table 4-3: Education expenditure ratio by gender of children 42 Table 4-4: Education expenditure ratio between urban and rural areas .43 Table 4-5: Education expenditure ratio by education levels of household head 44 Table 4-6: Education expenditure ratio by occupations of household head 45 Table 4-7: Education expenditure ratio by gender of household head 45 Table 4-8: Tobit Estimation Results 47 Table 4-9: Effect of number of schooling age and of schooling children on education expenditure ratio 50 Table 4-10: Wald test result on significance of the model 51 Table 4-11: Tobit and Robust estimation of Tobit .52 viii | P a g e that there are more schooling age children, there is more education expenditure On the other hand, it (3.2%) is smaller than the effect of number of schooling children (8.1%) on education expenditure ratio In fact, family having schooling age children does not mean they will send that child to school Consequently, it does not reflect actual education expenditure spending for children In other words, the number of schooling age children variable may not as good as the number of schooling children variable in term of measuring the effect to education expenditure (See Table 4-9) Table 4-9: Effect of number of schooling age and of schooling children on education expenditure ratio Schooling AGE children Schooling children Schooling AGE of boys Schooling AGE of girls Schooling boys Schooling girls Coef .0317565 0810726 0288349 0339491 0834667 076705 t-statics 12.48 33.20 9.69 11.95 27.88 26.64 Source: Tobit estimation results regressed from VHLSS 2012 4.3.1.3 Effected by geographic factors The estimation results point out that, controlling other variables constant, the percent of education expenditure over total expenditure of the family whose lives in the Red river delta, North central area and Central coastal area, South East is higher than the percent of education expenditure over total expenditure of the family whose lives in Mekong river delta by about percent, percent and 1.4 percent, respectively In contrast, ceteris paribus, the percent of education expenditure over total expenditure of the family whose lives in the Northern midland and mountain areas, Central highlands is lower than the percent of education expenditure over total expenditure of the family whose lives in Mekong river delta by 1.1 percent and 0.8 percent, respectively 50 | P a g e These results are in consists with our hypothesis stated in previous chapter On the other hand, it proves the difference in education expenditure between regions relatively These differences may be in compliance with the social - natural condition between regions In fact, Northern midland and mountain areas, and Central highlands are the places where economic and natural condition have been in difficult The average per capita income is lower than the rest regions (see the Appendix 8) Therefore, education may not be considered as important as it should be Consequently, the education expenditure ratio is less than other expenditure such as foods expenditure Besides, the marginal effect on urban is 0.0134 This means that after controlling for other variables, the percent of education expenditure over total expenditure of the family whose lives in urban areas is 1.34 percent higher than those whose lives in rural areas This result is consistent with Glewwe and Patrinos (1999), Ersado (2005), and Park (2008) 4.3.2 Testing for regression 4.3.2.1 Testing the significant of coefficients simultaneously for regressions We use Wald test to measure the overall significance of the model The null hypothesis is that all the slope coefficients in the regression are simultaneously equal to zero Ho: β1 = β =…= β 13 =0 H1: βi is different from zero Table 4-10: Wald test result on significance of the model Function Tobit function Null Hypothesis F test value Prob>F β1 = β =…= β 13 =0 169 0.000 51 | P a g e The result in the Table 4-10 shows that F test value is 169 and p value is practically zero Therefore, we can strongly reject the hypothesis that collectively all the explanatory variables have no impact on the dependent variable, education expenditure ratio At least one regressor has significant impact on the regressand 4.3.2.2 Heteroscedasticity test We compare the robust standard errors from Robust estimation of the Tobit model with the standard errors of the tobit estimation to test the Heteroscedasticity Accordingly, the output in the Table 4-12 shows that there are no vast differences in estimated standard errors between Tobit regression and Robust Estimation of Tobit Table 4-11: Tobit and Robust estimation of Tobit Coef Std Err Robust Std Err Gender -.0079593 0046 0048 Income 3.00e-06 8.79e-07 1.88e-06 R1 0311451 0057 0059 R2 -.0202405 0064 0055 R3 0174227 0053 0052 R4 -.0141657 0073 0069 R5 0233161 0069 0070 Urban 0221807 0042 0043 Ethnic 0284402 0056 0053 Numchild 0810726 0022 0024 002889 0004 0004 Job2 -.0306151 0070 0072 Job3 -.0487153 0072 0080 0013 0016 Hhedu /sigma 52 | P a g e CHAPTER CONCLUSION AND POLICY IMPLICATION This study aims to find out the effect of household characteristics to education expenditure of the children in Vietnam, both in urban and rural areas, which spread out six regions of Vietnam, including Red river delta (R1), Northern midland and mountain areas (R2), North central area and Central coastal area (R3), Central highlands (R4), South East (R5) and Mekong river delta (R6) First, the study measures how important of education comparing to other goods is Accordingly, the study defines education expenditure as the ratio of education expenditure over total expenditure of the family and then, using description statistics method, compares the expenditure ratio of education to the ratio of other goods expenditure of family, including ratio of health care expenditure and the ratio of foods spending Second, the study use Tobit model to estimate the effect of households’ characteristics, including socio-economic, demographic and geographic factors on education expenditure ratio 5.1 Conclusion remarks Based on the findings of the study, there are three primary conclusions First, geographic factors are important indicator in education expenditure Accordingly, it is demonstrated that urban –rural and regional differential is still observed with regard to education expenditure Particularly, the Red River Delta has the highest average expenditure ratio of education and the Northern highland and mountainous region and Mekong River Delta has the lowest proportion compared to other regions Beside, in the Red river Delta region, Northern highland and mountainous region, the Highland region and the Southeast region, the average expenditure ratio of education is also higher than the average expenditure of health care and of foods However, in the Northern highland and mountainous region and the Mekong River Delta region, the average expenditure ratio of foods is higher 53 | P a g e than the rests Furthermore, the education expenditure ratio for high education is much higher than the ratio for primary and secondary level for all six regions Second, it is proved that education expenditure ratio is impacted by socio-economic status of family In particular, income and education level of household head effect positively on education expenditure ratio Beside, different job of household head is also correlated with education expenditure ratio for children Similarly, there is the association between ethnic of family and education expenditure ratio for children Particularly, the ratio of families being the Kinh is higher than those being other ethnic Finally, education expenditure ratio is also associated with demographic factors In fact, the families whose household head being mother have higher education expenditure ratio than those whose household head being father In addition, the number of schooling children influence positively on education expenditure of the family Interestingly, we find out that in Vietnam, the education expenditure ratio for the boys and the girls are relatively equal In other words, it indicates that there is not gender discrimination in schooling of boys and girls in Vietnam 5.2 Policy implications The implications from observed findings of the study are suggested as follows: First, Vietnam is still facing with unequal between urban and rural areas, and between the regions in term of education expenditure This may lead to other outcome in future such as unequal income or unequal in living standard between rural and urban or between regions of Vietnam Thus, it is likely enhanced efforts of the policy makers to respond with the disadvantage Second, unfavorable situation in term of low proportion of education expenditure comparing to foods expenditure in Northern highland and mountainous regions and Mekong River Delta region indicates that the government should set priority policy 54 | P a g e and intervention to deal with this problem On the one hand, policy makers need to augment the living standard of these regions On the other hand, it is necessary to promote higher spending for education of children comparing to other consumption Third, the correlation between better parent’ background and higher in education expenditure ratio for children confirms the fact that higher socio-economic status of family is, more attention for education of children will be paid Fourth, education expenditure for high education level is obviously become as the burden of the family This should be taken into account in national policy in order to set the financial support by the government Finally, the association between more numbers of schooling children and higher in education expenditure ratio indicates that parents should maintain the small family size in order to improve their children achievement in term of education Furthermore, it also suggests that the policy maker should be further emphasized in fertility reduction run 5.3 Limitation of the study and recommendation for future researches Although this study could provide some implications above, it still has several limitations Due to the lack of data in VHLSS 2012, which did not present expected rate of return to children education from the parents, the study did not input this variable in the model as one of the indicators for education expenditure of parent for children Besides, there is 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