Does choice of major matter? The effect of fields of study on Vietnamese young graduates’ early career earnings

By Nguyen Ha Dang Khoa (VNP 26)

Supervisor: Dr. Truong Dang Thuy

Abstract:

Differentials in wages at higher education by fields of study has received attention from economists, especially in developed countries for a long time. Both theory and empirical evidence show that at a young age, individuals tend to invest more in education with the hope for higher payoffs in the future. In Vietnam, the study of Tran and Van Vu (2020), though, provides evidence for the wage differentials between college majors, it covers a wide range of age groups from 20 to 60. Therefore, it is essential to conduct study on the return on college majors for the young graduate workers.
This thesis investigates the effect of major choice on students’ earnings after they have graduated. Using Data from the Labor Force Survey 2019, the author focuses on young graduates who are from 21 to 33 years old. The study applied the Heckman sample selection model which corrects the bias of “omitted variables” for the unobserved factors. The model estimates the earnings equation and explains the decision to participate into the labor market of individuals. Results from the observed earnings equation show that graduates who study in Biology, Agriculture, Law and Education see their earnings after school less than their Engineer & Technology major base group by 8,1%, 12,4%, 12,1% and 6,2%. On the other hand, young graduates in Defense & Security and Creative art & Design gain higher earnings than the base group at 16,5% and 7,0%, respectively.