Based on Vietnamese Labour Force Survey data from 2011-2013 we analyse the impact of minimum wage
changes on earnings inequality. Controlling for standard worker specific wage-determining factors and
unobserved heterogeneity, we find that minimum wage adjustments are associated with higher individual
wages. Moreover, minimum wages serve to reduce income inequality through decreasing the gap between
the wages of those in the lower part of the wage distribution relative to the median earner. This compression
of wages is driven by workers employed in the state and foreign sector, whereas those employed in domestic
private firms and the informal sector do not experience minimum-wage related changes in the shape of the
wage distribution