While village industries are known to play an important role in the
development of rural areas in developing countries, little is known about village
industries in transition economies. Also, little attention has been paid to the question of
how human capital contributes to the choice of jobs and income of workers in these
village industries. This paper inquires into the determinants of the workers’ choice of jobs
and income in two village-based industrial clusters in Northern Vietnam. We found that
formal schooling plays an important role in the self-selection of jobs and income of
workers in all of the villages.