Does Urbanization Reduce Unemployment? Evidence from Vietnamese Provincial Panel Data

Abstract

This study examines the complex relationship between urbanization and unemployment rates across 63 Vietnamese provinces from 2010 to 2020. Using fixed-effects panel data analysis, we find robust evidence of a nuanced relationship between urbanization levels and unemployment rates. While provinces experiencing higher urbanization rates generally demonstrate significant reductions in overall unemployment, our analysis reveals that larger urban centers paradoxically show higher unemployment rates. Our results contribute to the ongoing debate about urbanization's role in labor market dynamics and provide important policy implications for balanced regional development in Vietnam, particularly regarding resource allocation between major urban centers and smaller cities and migration management. The study's findings are especially relevant for developing economies experiencing rapid urbanization transitions.