The impact of technical change on income inequality in Vietnam

Abstract

PurposeThe primary purpose of this study is to explore the effect of technical changes on provincial-level income inequality in Vietnam. The authors also investigate whether the quality of institutions and human capital level moderate this relationship.Design/methodology/approachThis research applies the fixed-effect and random-effect models on a balanced panel data set of 63 Vietnamese provinces/cities from 2010 to 2020.FindingsThe study’s empirical results show that technical improvement has a nonlinear influence on income disparity in Vietnamese localities. When the local level of technology is limited, technological change can mitigate income disparity. However, as local technological levels increase, inequality tends to rise. Moreover, the study also reveals that the quality of a province’s institutions and the level of human resources are factors that moderate the correlation between technological change and income inequality. For provinces with better institutional quality and/or better human resources, inequality tends to decline under the impact of technological change.Practical implicationsThe results of this study suggest that while encouraging technology advancement, localities should also ensure sustainable development, reduce income inequality and focus on improving institutional quality and human resources development.Originality/valueThere are increasing concerns about the impact of technical change on inequality in income distribution; however, empirical evidence on this relationship in developing countries remains scarce. This study is among the few attempts to examine this issue at the provincial level of a developing country considering the moderation effect of institutional quality and human capital level.