Certifiable management standards, labor productivity, and worker wages: Evidence from the food sector in Vietnam

Abstract

AbstractFood production and trade have become inseparable from requirements about product quality and safety, as well as social and environmental aspects of production processes. To demonstrate compliance with these requirements, firms adopt voluntary private certifiable management standards (CMS). How these affect trade, organizational performance, and employee outcomes has become an area of active research in the last decade. This paper analyses how standards affect labor productivity and wages using a 3‐year panel of small and medium firms from the food sector in Vietnam covering the period 2010–2014. Even though the prevalence of CMS in the sample is low, the results show that standards improve both labor productivity and wages. However, the difference in the size of the productivity and wage premiums attributable to standards is not significant. This implies that CMS can be a useful management practice for improving firm productivity when combined with a fair compensation of human resources. The findings are important for lower‐income countries facing low rates of adoption of private CMS and the evolving consumer preferences increasingly attuned to the issues of product quality, food safety, and environmental risks. The results are robust to several specification changes and estimation methods, including firm fixed effects, control function, and instrumental variable approach, which take endogeneity of certification into account. [EconLit Citations: L66, D22, J4, J81, O12].