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

•Removing language barriers significantly reduces inequality among ethnic groups.•Narrowing the gap in inequality for minorities is achieved through education.•Evidently the special needs of minority children are not addressed in the classroom.•Unequal treatment in favor of the majority may exist in the Vietnamese labor market. 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 a decomposition approach to disentangle factor endowments and returns by ethnic group, we draw four key conclusions. First, removing language barriers would significantly 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 favor of the majority in mixed communes, suggesting that either the special needs of minority children have not been adequately addressed in the classroom, or unequal treatment in favor of the majority exists in the labor market. Third, in contrast to recent literature, there is no difference in the benefits drawn from enhanced infrastructure at the commune level across ethnic groups. Finally, we find little evidence to support the established views that the ethnic gap is attributed largely to differences in the returns to endowments. Overall, our research highlights the importance of considering language barriers and the availability of infrastructure for ethnic inequality.