Language, Mixed Communes and Infrastructure: Sources of Inequality and Ethnic Minorities in Vietnam

This paper re-examines the sources of inequality in Vietnam, a transitional economy with large reductions in poverty from recent and dramatic economic growth, but vastly unequal gains across ethnic groups. Using an instrumental variable approach to provide consistent estimators of explanatory variables at household and commune levels for ethnic differences in real household expenditure per person, we draw four key conclusions. First, removing language barriers would signifcantly reduce inequality among ethnic groups, narrowing the ethnic gap, and especially so through enhancing the gains earned by minorities from education. Second, variations in returns to education exist in favour of the majority in mixed communes, suggesting that either the special needs of minority children have not been adequately addressed in the classroom, or preferential treatment and the possibility of some form of discrimination exists in the labour market. Third, in contrast to recent literature, there is little dierence between ethnic groups in terms of the benefits drawn from enhanced infrastructure, such as power and clean water, at the commune level. An exception is the returns to roads, which differentially benefits the minority group. Finally, contrary to established views, we find that as much as 50 to 70 percent of the ethnic gap is attributed to differences in endowments, and not to differences in the returns to endowments.