Ownership, Organization, and Income Inequality: Market Transition in Rural Vietnam

Abstract

In transitional economies, the scale of economic enterprise and the allocation of property rights shape social structures and influence income distribution. In agrarian economies, where labor-intensive family enterprises dominate, political officials' income advantages decline rapidly relative to those of private entrepreneurs. Larger enterprises, however, provide greater income opportunities for officials, especially when a government retains an ownership stake in the initial phases of reform. This article replicates the findings from an earlier study of rural China using comparable survey data from Vietnam. We find that during the first two decades of rural market reform in Vietnam and China, the scale and ownership of firms differed radically. Small family enterprises dominated rural development in Vietnam, whereas China's development was dominated by larger firms, initially established by rural governments. Consequently, while cadre income advantages have kept pace with those of private entrepreneurs in China, they have declined rapidly in Vietnam.

Political Capital in a Market Economy

“…This line of reasoning reinforces the view that politically connected managers are advantaged in operating companies (Róna-Tas 1994:45). Despite considerable empirical research on the effect of political capital on individual and household level earnings, results remained inconclusive (Nee 1989(Nee , 1991(Nee , 1996Róna-Tas 1994;Domanski and Heynes 1995;Parish, Zhe and Li 1995;Bian and Logan 1996;Parish and Michelson 1996;Xie and Hannum 1996;Gerber 2000Gerber , 2001Gerber , 2006Zhou 2000;Bian and Zhang 2002;Walder 2002;Wu 2002;Zang 2002;Hauser and Xie 2005;Walder and Nguyen 2008).…”

New Light on China’s Rural Elites

“…Early studies of urban elites in China include Walder (1995) and Bian and Logan (1996) both studying Tianjin in 1988 (the later paper also 1993). When using data for rural Vietnam in 2002 and estimating models as in Walder (2002a), Walder and Nguyen (2008) do not find significant coefficients for cadre. According to the authors the difference can be interpreted to be caused by cross-country differences in the industrialization process.…”

Weak ties, strong ties, and job mobility in urban China: 1978–2008

“…These firms are profit-driven, with hard budget constraints, and fully responsible for their survival (Walder and Nguyen, 2008;Wu, 2005). They are often located in competitive industries and actively engage in innovative activities Opper, 2010, 2012).…”

“…First, the higher level of market competition faced by the market sector can increase their reliance on weak ties than the state sector. Firms in the market sector are often located in more competitive industries and have stricter budget constraints (Walder, 2009;Walder and Nguyen, 2008). Firms in the state sector, in contrast, are often protected and sponsored by the government (Haveman et al, 2014;Lin, 2011;Oi, 1995).…”