Title: The Turning Point in the Vietnamese Economy : Revisiting Labor Surplus Theory
Authors: YAMADA, Takahiro
Abstract: This paper discusses the reason for economic growth and inter-sectoral wage inequality in Vietnam from the perspective of dynamic labor mobility during the period of 2004 ― 2010. To analyze dynamic labor mobility, I revisit labor surplus theory under the dualistic economy as proposed by Lewis (1954). According to the analytical results, notably with the comparison between the marginal productivity of labor and the real wage rate in the agricultural sector, the marginal productivity of labor is still greater than the real wage rate in the sector. That is, the marginal productivity of labor is still 69.1 percent of the real wage rate as of 2010. Hence, it is plausible that the Vietnamese economy did not reach the turning point by the end of the decade, implying the existence of vast amounts of cheap labor in the agricultural sector and a continuously diverging real wage rate gap between agricultural and non-agricultural sectors. Vietnamese growth would be sustained awhile by the development of the non-agricultural sector with the absorption of cheap labor supplied from the agricultural sector.
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