TAILIEUCHUNG - Investment in human capital and industrial development in Vietnam's provinces

This paper examines the effect of human capital accumulated from higher education on regional development in Vietnam. It also examines a possible two-way causality between these two variables. Two types of schools are compared and contrasted vocational and university. | RESEARCHES & DISCUSSIONS INVESTMENT IN HUMAN CAPITAL AND INDUSTRIAL DEVELOPMENT IN VIETNAM’S PROVINCES by Assoc. Prof., Dr. VUÕ BAÊNG TAÂM* & Prof., Dr. ERIC IKSOON IM* This paper examines the effect of human capital accumulated from higher education on regional development in Vietnam. It also examines a possible two-way causality between these two variables. Two types of schools are compared and contrasted: vocational and university. Regional development is measured by industrial output per capita and industrialization level for each province. A combination of the System Generalized Method of Moments (SGMM) and Fixed Effect Three Stage Least Squares (FE3SLS) procedures is performed in order to control lagged dependent variables and improve the efficiency of the estimators. The results show that vocational education helps regional development in Vietnam more than university education. On the reverse causality, we find that the effect of regional development on university enrollments is higher than on vocational-school enrollments. Keywords: regional development, vocational schools, universities. 1. Introduction Most people agree that human capital accumulated from education is very crucial for economic development. Higher education has shown its effects on increases in GDP per capita or productivity. However, educators and economists alike are divided on what kind of education is important to the regional development in a transitional economy like Vietnam. In the meantime, most societies have valued university education much higher than vocational education. This tendency is even more pronounced in Asia where households strive to send their children to universities, causing vocational schools to take a back seat in the nation’s educational system. Influenced by the preferable mode of education, most economists have focused their attention on general or university education, ignoring the effects of vocational education on economic development. Using OLS on two .

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