CAN VIETNAM ACHIEVE THE MILLENNIUM DEVELOPMENT GOAL ON POVERTY REDUCTION IN HIGH INFLATION AND...
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Transcript of CAN VIETNAM ACHIEVE THE MILLENNIUM DEVELOPMENT GOAL ON POVERTY REDUCTION IN HIGH INFLATION AND...
CAN VIETNAM ACHIEVE THE MILLENNIUMDEVELOPMENT GOAL ON POVERTY REDUCTION IN HIGH
INFLATION AND ECONOMIC STAGNATION?
Nguyen Viet CUONGIndochina Research and Consulting, Hanoi, Vietnam
First version received September 2009; final version accepted December 2010
An important aspect of the Millennium Development Goals (MDGs) to which Vietnamis committed is to reduce overall and food poverty. Although Vietnam has achievedremarkable reductions in poverty during recent years, Vietnam may not achieve itsMDGs on poverty reduction because of high inflation and economic stagnation. Thispaper uses three recent Vietnam Household Living Standard Surveys (VHLSSs), in2002, 2004, and 2006, to forecast poverty in 2008 and 2010 to examine whetherVietnam can achieve its MDGs on poverty reduction. The forecast takes into accounthigh inflation in 2008 and economic stagnation during 2008–09. It is found thatVietnam may be able to achieve its MDGs on reduction of overall poverty; however, theMDGs on food poverty reduction may not be achieved.
Keywords: Millennium Development Goals; Poverty; Food poverty; Householdsurvey; VietnamJEL classification: I31, I32, O12
I. INTRODUCTION
V ietnam committed itself to the implementation of the Millennium Devel-opment Goals (MDGs) in 2000. The first MDG is to reduce the overall aswell as food poverty. More specifically, the country aims to: (i) reduce by
50% the fraction of the population living below an internationally accepted povertyline between 2001 and 2010, i.e., from 32% in 2000 to around 16% in 2010; (ii)reduce by 75% the number of people living under an internationally accepted foodpoverty line by 2010, i.e., from 12% in 2000 to around 3% in 2010; and (iii) reduce
I would like to thank anonymous reviewers for their very helpful comments and suggestions on thispaper.
The Developing Economies 49, no. 3 (September 2011): 297–320
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
doi: 10.1111/j.1746-1049.2011.00136.x
by 60% the number of households living below the poverty line provided in theNational Targeted Programs on Poverty Reduction and Job Creation.1
Vietnam has committed itself to a “growth with equity” strategy of development.The country has achieved high economic growth, with annual GDP growth rates ofaround 7.5% over the past ten years. Poverty rates declined remarkably from 58%to 16% between 1993 and 2006. The number of people below the food poverty linealso declined from 25% to 7% during the same period.
In spite of remarkable achievements in poverty reduction in recent years,Vietnam might not achieve its MDGs on poverty reduction because of high infla-tion and economic stagnation. There was very high inflation during 2008. Theoverall CPI increased around 23% during the first nine months of 2008. Duringthese months, the food and nonfood CPIs increased by 36% and 13%, respec-tively. High inflation can have ambiguous impacts on the poor. The realconsumption of the poor can be reduced by inflation. On the other hand, the poorare also producers, who can experience increases in income due to inflation.Depending on the reasons for inflation and the structure of the economy,the effect of price increases on poverty can be both negative and positive (Raval-lion and Lokshin 2004; Hertel and Winters 2006; Ivanic and Martin 2008).The effect of high inflation on poverty cannot be signed a priori. Empiricalfindings on the impact of inflation on poverty are also not consistent. Forexample, Ivanic and Martin (2008) show that increases in food prices lead toincreases in poverty in some countries and decreases in poverty in others. For thecase of Vietnam, Minot and Goletti (2000) find that an increased price of ricecan increase poverty, while Ivanic and Martin (2008), Vu and Glewwe (2009)find evidence that an increased price of rice and food might decrease povertyslightly.
The second challenge to the MDGs on poverty reduction is the recent crisis ofthe global and Vietnamese economies. The global financial crisis and economicstagnation in Vietnam lowered the average economic growth rate during the period2008–10. As a result, the poor may be harmed and poverty will not decline asexpected.
This paper has two main objectives. The first objective is to propose a simplemethod to forecast poverty using panel data from household surveys. Projection ofpoverty trends can provide information useful for poverty monitoring and evalu-ation. The second objective is to examine whether Vietnam can achieve its MDGson poverty reduction by forecasting poverty in 2008 and 2010 using three recent
1 This program is implemented by the Ministry of Labor, Invalid, and Social Affairs. This programprovides the poor with support and assistance in education, healthcare, production, etc. For theperiod 2006–10, this program is structured as and renamed the “National Targeted Programs onPoverty Reduction.”
298 the developing economies
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
VHLSSs in 2002, 2004, and 2006. The forecasts take into account high inflation in2008 and economic stagnation during 2008–09. Since the poverty line provided inthe National Targeted Programs on Poverty Reduction and Job Creation is notconsistent over time, the paper will rely on the overall and food poverty lines thatare constructed by the General Statistical Office of Vietnam (GSO) and the WorldBank in the analysis. These poverty lines are often regarded as internationallyaccepted poverty lines.
Compared to previous studies in Vietnam and other countries, this paper hasseveral special features. First, the paper examines the poverty trend when there isrelatively high inflation and economic stagnation in Vietnam. At the moment, massmedia in Vietnam claims that the poor are harmed by high inflation and the MDGson poverty reduction might not be achieved by 2010. However, there has not beena quantitative study on this issue so far. Second, unlike other studies on therelationship between inflation and poverty, the paper not only estimates the effectof inflation on poverty but also forecasts poverty levels in the future period. Third,the paper investigates the effects of inflation on both overall and food povertymeasured by the three popular Foster–Greer–Thorbecke poverty indexes. All theprevious studies in Vietnam focus only on the impacts of increases in rice and foodprices on the overall poverty incidence.
The paper is structured in five sections. The second section introduces the dataset. The third section briefly describes the poverty trend in Vietnam. The fourthsection presents estimation method and empirical findings. Finally, the fifth sectionconcludes.
II. DATA SETS
The paper relies on available data from the VHLSSs in the years 2002, 2004, and2006. The surveys were conducted by the GSO with technical support of the WorldBank. The numbers of sampled households in VHLSSs 2002, 2004, and 2006 are29,533, 9,188, and 9,189, respectively. The surveys are representative for thenational, rural and urban, and regional levels. It is interesting that VHLSSs 2002and 2004 set up panel data of 4,008 households, and VHLSSs 2004 and 2006 setup panel data of 4,126 households. These panel data are representative for urbanand rural Vietnam. However, there are only 1,872 households covered by all threeVHLSSs. It means that the panel data sample from VHLSSs 2002 and 2006 hasonly 1,872 households.
The surveys collect information through household- and community-level ques-tionnaires. Information on households includes basic demography, employment,education, health, income, expenditure, housing, assets, and especially informationon healthcare utilization, out-of-pocket healthcare spending, and health insurance.Information on commune characteristics consists of demography and general
vietnam’s mdg on poverty reduction 299
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
situation of communes, economic conditions, nonfarm employment, agricultureproduction, local infrastructure and transportation, education, health, and socialaffairs.
Expenditure and income per capita are collected by using very detailed ques-tionnaires in VHLSSs. Expenditure includes food and nonfood expenditure. Foodexpenditure includes purchased food and foodstuff and self-produced products ofhouseholds. Nonfood expenditure comprises expenditure on education, healthcareexpenditure, expenditure on houses and commodities, and expenditure on power,water supply, and garbage. Regarding income, household income can come fromany source. Income includes income from agricultural and nonagricultural produc-tion, salary, wage, pensions, scholarship, income from loan interest and houserental, remittances, and social transfers. Income from agricultural production com-prises crop income, livestock income, aquaculture income, and income from otheragriculture-related activities.
III. POVERTY IN VIETNAM
In this paper, a household is classified as poor if their per capita expenditure isbelow the overall poverty line set up by the GSO and the World Bank. Similarly,a household is defined as food poor if their per capita expenditure is below the foodpoverty line of the GSO and the World Bank. The food poverty line is equivalentto the expenditure level that allows for nutritional needs equivalent to 2,100calories per day. The overall poverty line is the consumption expenditure which isequal to the food poverty line plus expenditure on some essential nonfood con-sumption such as clothing and housing. The overall and food poverty lines duringthe period 2002–06 are presented in Table 1.
It should be noted that the definition of the food poverty line does not mean thata household whose consumption expenditure is above the food poverty line willnecessarily achieve 2,100 calories per day per person, due to consumption of somenecessary nonfood items. Thus, households below the food poverty line can beregarded as the extremely poor households. However, in the current paper, we use
TABLE 1
Overall and Food Poverty Lines in Vietnam (1,000 VND)
2002 2004 2006
Overall poverty line 1,917 2,077 2,560Food poverty line 1,382 1,500 1,915
Source: World Bank (2003, 2007).
300 the developing economies
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
the terminology “food poverty” instead of “extreme poverty” since “food poverty”is widely used in the MDG documents and other poverty assessment report (e.g.,World Bank 2003).
To examine poverty, the paper uses the three popular Foster–Greer–Thorbeckepoverty indexes (Foster, Greer, and Thorbecke 1984). The poverty indexes includethe poverty incidence (P0), poverty gap index (P1), and poverty severity index (P2).Tables 2 and 3 present the estimates of the poverty indexes using the overall andfood poverty lines for the period 2002–06. It is shown that the overall and foodpoverty was reduced for both rural and urban areas during the period 2002–06. In2006, the overall poverty incidences were 20.4% and 3.9% in the rural and urbanareas, respectively. The food poverty incidences were 8.7% and 1.2% in the ruraland urban areas, respectively.
Poverty differs substantially across regions in Vietnam. Except for the SouthEast region, all regions experienced reduction in both overall and food poverty overthe period 2002–06. However, poverty remains very high in some regions such asthe North West, the North East, the North Central Coast, and the Central Highland.
It should be noted that the incidence of overall poverty was 16% in 2006. Itmeans that the first objective of the MDGs on poverty reduction (“reduce by 50%the ratio of people living below an internationally accepted poverty”) was alreadyachieved in 2006. However, because of high inflation in 2008 and economicstagnation, it is not clear whether Vietnam can achieve the MDGs on povertyreduction in 2010. This issue will be addressed in the next section.
IV. ESTIMATION OF POVERTY IN 2008 AND 2010
A. Poverty Estimation under Assumption of No Inflation and EconomicStagnation
1. MethodologyTo predict poverty in 2008 and 2010, we need to predict the per capita expen-
diture of households in 2008 and 2010. To do so, we assume the following relationsbetween assets, income, and consumption of households:
C Y Sit it it= − , (1)
Y F X Yit i t i t it= ( ) +− −( ) ( ), ,1 1 ε (2)
where Cit, Yit, and Sit are the consumption expenditure, income, and saving,respectively, of household i in period t; Xi(t-1) and Yi(t-1) are the assets and income ofthe household in the previous period (t - 1); eit denotes stochastic income shocksto the household in period t. Equation (2) means that the expected income in afuture period depends on the assets and income of the current period. However, therealized income in a future period can be different from the expected income
vietnam’s mdg on poverty reduction 301
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
TAB
LE
2
Ove
rall
Pove
rty
duri
ngth
ePe
riod
2002
–06
Are
as20
0220
0420
06
P0
(%)
P1
P2
P0
(%)
P1
P2
P0
(%)
P1
P2
Rur
al/U
rban
:R
ural
35.6
0.08
650.
0304
25.0
0.06
120.
0221
20.4
0.04
950.
0179
Urb
an6.
60.
0130
0.00
413.
60.
0070
0.00
213.
90.
0077
0.00
21R
egio
n:R
edR
iver
Del
ta22
.40.
0426
0.01
2012
.10.
0212
0.00
568.
80.
0154
0.00
42N
orth
Eas
t38
.40.
0965
0.03
2929
.40.
0701
0.02
3725
.00.
0563
0.01
86N
orth
Wes
t68
.00.
2410
0.10
4858
.60.
1911
0.08
0349
.00.
1565
0.06
48N
orth
Cen
tral
Coa
st43
.90.
1063
0.03
6131
.90.
0809
0.02
9229
.10.
0766
0.02
90So
uth
Cen
tral
Coa
st25
.20.
0596
0.02
1419
.00.
0510
0.02
1112
.60.
0264
0.00
86C
entr
alH
ighl
ands
51.8
0.16
660.
0705
33.1
0.10
650.
0451
28.6
0.08
820.
0366
Sout
hE
ast
10.5
0.02
240.
0078
5.4
0.01
200.
0044
5.8
0.01
410.
0055
Mek
ong
Riv
erD
elta
23.4
0.04
660.
0142
15.9
0.02
990.
0090
10.3
0.01
820.
0048
All
Vie
tnam
28.8
0.06
940.
0243
19.5
0.04
720.
0170
16.0
0.03
830.
0137
Sour
ce:
Est
imat
ions
from
VH
LSS
s20
02,2
004,
and
2006
.N
ote:
P0:
pove
rty
inci
denc
e;P
1:po
vert
yga
pin
dex;
P2:
pove
rty
seve
rity
inde
x.
302 the developing economies
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
TAB
LE
3
Food
Pove
rty
duri
ngth
ePe
riod
2002
–06
Are
as20
0220
0420
06
P0
(%)
P1
P2
P0
(%)
P1
P2
P0
(%)
P1
P2
Rur
al/U
rban
:R
ural
13.6
0.02
570.
0076
9.7
0.01
950.
0062
8.7
0.01
810.
0059
Urb
an1.
90.
0031
0.00
080.
80.
0015
0.00
041.
20.
0015
0.00
03R
egio
n:R
edR
iver
Del
ta5.
30.
0074
0.00
172.
30.
0034
0.00
082.
10.
0034
0.00
07N
orth
Eas
t15
.40.
0265
0.00
7111
.40.
0189
0.00
519.
50.
0172
0.00
51N
orth
Wes
t46
.10.
1080
0.03
5834
.80.
0822
0.02
6829
.90.
0710
0.02
49N
orth
Cen
tral
Coa
st17
.50.
0293
0.00
7713
.60.
0254
0.00
7714
.30.
0304
0.00
99So
uth
Cen
tral
Coa
st9.
00.
0183
0.00
638.
10.
0201
0.00
824.
80.
0085
0.00
21C
entr
alH
ighl
ands
29.5
0.07
180.
0241
18.8
0.04
620.
0156
16.4
0.03
950.
0146
Sout
hE
ast
3.0
0.00
670.
0025
1.5
0.00
400.
0015
2.3
0.00
610.
0022
Mek
ong
Riv
erD
elta
6.5
0.01
010.
0026
4.0
0.00
640.
0017
2.7
0.00
330.
0007
All
Vie
tnam
10.9
0.02
040.
0061
7.4
0.01
490.
0047
6.7
0.01
370.
0044
Sour
ce:
Est
imat
ions
from
VH
LSS
s20
02,2
004,
and
2006
.
vietnam’s mdg on poverty reduction 303
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
because of income shocks eit. A lucky season can lead to higher income thanexpected, while adverse shocks can reduce the realized income of the households.
Now suppose that we have panel data on income, consumption expenditure, andassets for the periods (t - 1) and t and want to forecast consumption expenditure inthe period (t + 1). Based on the model specified in equations (1) and (2) andfeatures of the panel data, we can estimate expenditure and poverty in the period(t + 1) by the following steps:
(i) Estimate the relation between per capita income in the period t and assetsin the period (t - 1) using the panel data from surveys in the periods t and(t - 1):
ln ln ,( ) ( )Y Y Xit i t i t it( ) = + ( ) + +− −β β β ε0 1 1 1 2 (3)
where Xi(t-1) denotes the asset variables and eit denotes stochastic income shocks. eit
is distributed as N (0, s 2).(ii) Apply the estimated relationship from equation (3) to the survey at time t to
predict households’ per capita income at the time (t + 1):
ln ln .1 0 1 2 1ˆ ˆ ˆ ˆ ˆ( ) ( )Y Y Xi t it it i t+ +( ) = + ( ) + +β β β ε (4)
To attribute the predicted income to the time (t + 1), we need an assumption thatthe marginal return of assets, i.e., the coefficients b1 and b2, are unchanged duringthe period between (t - 1) and (t + 1). Since we do not observe ˆ ( )εi t+1 , we predictit by drawing a number randomly from the distribution of ε̂it in equation (3),i.e., N 0, 2σ̂( ) . This implies that we need an assumption that Var (eit) is equal toVar (ei(t+1)). The simulation of errors to estimate per capita expenditure is alsoused in several studies such as Elbers, Lanjouw, and Lanjouw (2003), andBarham and Boucher (1998). We cannot use the predicted income without thepredicted error to compute income and expenditure since this way leads tobiased estimates of poverty indexes (Hentschel et al. 2000).(iii) Predict per capita consumption expenditure:
ˆ ,( )ˆ ln ˆ ˆ ˆ ( )C
C
Yei t
it
it
Y Xit it i t+
+ ( ) + += +1
0 1 2 1β β β ε(5)
with an assumption thatC
Y
C
Yi t
i t
it
it
( )
( )
+
+=1
1
. This implies that the ratio of consumption
expenditure to income of households at the time (t + 1) is equal to that at the timet. We examine this assumption by calculating the ratio of consumption expenditureto income and the average change in this ratio during the period 2002–06 using thepanel data from VHLSSs 2002, 2004, and 2006 (Appendix Table 3). If thisassumption holds, the means and the standard deviations of household-level
304 the developing economies
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
differences in the ratio of consumption expenditure to income between yearsshould be close to zero. Appendix Table 3 shows that the means are rather close tozero, but the standard deviations are approximately equal to 0.2. For a number ofhouseholds, the assumption is not valid. Thus it is a strong assumption. Allowingfor a more flexible and realistic assumption on consumption behaviors ofhouseholds is beyond the scope of the paper, but certainly important for futureresearch.(iv) Estimate the overall and food poverty indexes using the predicted per capita
expenditure, ˆ( )Ci t+1 . The standard errors of the estimates will be calculated by
using bootstrap techniques.
2. Estimation resultsWe use panel data from VHLSSs 2004 and 2006 to predict the relation betweenincome in 2006 and assets and income in 2004. Then we apply this estimatedrelation to the assets and income in 2006 (from the VHLSS 2006) to predictincome in 2008. Expenditure in 2008 is computed from the predicted income in2008 and ratio of expenditure to income in 2006. Similarly, we use panel data fromVHLSSs 2002 and 2006 (lag of four years) to predict income and expenditure in2010. However, the estimates for 2010 should be interpreted with caution since thepanel data sample of VHLSSs 2002 and 2006 has only 1,872 households, whichmay not be nationally representative. As mentioned above, the projection ofincome and expenditure in 2008 is based on the assumption that macroeconomicchanges from 2006 to 2008 are the same as macroeconomic changes from 2004 to2006. Similarly, the projections of income and expenditure in 2010 are based onthe assumption that macroeconomic changes from 2002 to 2006 are the same asmacroeconomic changes from 2006 to 2010.
It should be noted that we have deflated all variables in VHLSSs 2002 and 2004in terms of 2006 prices. As a result, predicted income and expenditure for 2008 and2010 are in real terms of the 2006 prices. The poverty lines used for 2008 and 2010are the 2006 poverty lines.
The dependent and independent variables are described in Appendix Table 1.Independent variables include household composition, education of householdmembers, education of household head, lands and housing characteristics, villagevariables, urbanity, and dummy regional variables. All the independent variablesare used in the regressions of logarithm of per capita income. The regression resultsare presented in Appendix Table 2.
Table 4 presents the prediction of poverty indexes for 2008 under the assump-tion that there was no high inflation in 2008. The incidence of overall poverty isreduced from 16% in 2006 to 13.6% in 2008. The food poverty incidence is alsoreduced slightly from 6.7% to 6.3%. The rural areas have higher rates of povertyreduction than the urban areas.
vietnam’s mdg on poverty reduction 305
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
TAB
LE
4
Pred
icte
dPo
vert
yin
2008
Bas
edon
Pane
lD
ata
VH
LSS
s20
04an
d20
06:W
ithou
tH
igh
Infla
tion
in20
08
Are
asO
vera
llPo
vert
yFo
odPo
vert
y
P0
(%)
P1
P2
P0
(%)
P1
P2
Rur
al/U
rban
:R
ural
17.3
[0.6
]0.
0457
[0.0
022]
0.01
79[0
.001
1]8.
1[0
.5]
0.01
90[0
.001
3]0.
0068
[0.0
006]
Urb
an3.
5[0
.5]
0.00
75[0
.001
2]0.
0025
[0.0
005]
1.3
[0.3
]0.
0024
[0.0
007]
0.00
07[0
.000
3]R
egio
n:R
edR
iver
Del
ta10
.2[0
.9]
0.02
29[0
.002
5]0.
0079
[0.0
011]
3.9
[0.5
]0.
0076
[0.0
013]
0.00
23[0
.000
5]N
orth
Eas
t18
.5[1
.4]
0.04
87[0
.004
6]0.
0190
[0.0
023]
8.7
[1.0
]0.
0201
[0.0
028]
0.00
72[0
.001
3]N
orth
Wes
t35
.5[3
.3]
0.10
91[0
.013
1]0.
0467
[0.0
070]
20.1
[2.7
]0.
0521
[0.0
087]
0.01
97[0
.004
1]N
orth
Cen
tral
Coa
st22
.3[1
.6]
0.06
26[0
.006
0]0.
0254
[0.0
032]
11.3
[1.3
]0.
0276
[0.0
039]
0.01
01[0
.001
9]So
uth
Cen
tral
Coa
st12
.3[1
.3]
0.03
04[0
.003
8]0.
0114
[0.0
018]
5.3
[0.8
]0.
0118
[0.0
022]
0.00
41[0
.001
0]C
entr
alH
ighl
ands
20.3
[2.1
]0.
0618
[0.0
076]
0.02
69[0
.004
1]11
.1[1
.6]
0.02
98[0
.005
0]0.
0119
[0.0
026]
Sout
hE
ast
6.2
[0.8
]0.
0157
[0.0
022]
0.00
61[0
.001
2]2.
7[0
.5]
0.00
63[0
.001
5]0.
0023
[0.0
007]
Mek
ong
Riv
erD
elta
9.8
[0.8
]0.
0221
[0.0
024]
0.00
76[0
.001
1]3.
8[0
.5]
0.00
74[0
.001
3]0.
0023
[0.0
005]
All
Vie
tnam
13.6
[0.5
]0.
0355
[0.0
016]
0.01
38[0
.000
8]6.
3[0
.3]
0.01
45[0
.001
0]0.
0052
[0.0
005]
Sour
ce:
Est
imat
ions
from
VH
LSS
s20
04an
d20
06.
Not
e:St
anda
rder
rors
inbr
acke
ts(S
tand
ard
erro
rsar
eca
lcul
ated
byus
ing
boot
stra
pw
ith50
0re
plic
atio
ns.S
tand
ard
erro
rsar
eco
rrec
ted
for
sam
plin
gw
eigh
tsan
dcl
uste
rco
rrel
atio
n).
306 the developing economies
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
Table 5 presents the prediction of poverty indexes for 2010 under an assumptionthat the economic growth of the period 2006–10 is similar to that of the period2002–06. The overall poverty incidence is estimated at 10.6%. The poverty rates are13.7% and 2.3% in rural and urban areas, respectively. The food poverty incidenceof the country is reduced to 5%. This is higher than 3%, as stated in the MDGs.
To assess the accuracy of the poverty forecast method, we use panel data fromVHLSSs 2002 and 2004 to predict the poverty indexes in 2006. Then, we comparethese estimates with those based on the 2006 VHLSS. Table 6 presents the povertyestimates based on panel data of VHLSSs 2002 and 2004. It can be seen that thesepoverty estimates are very close to those estimated directly from the 2006 VHLSS(in Tables 2 and 3).
The findings mean that Vietnam can achieve the first objective of the MDGson reduction of overall poverty by 2008 if high inflation and economic stag-nation do not occur. However, it seems that Vietnam will find it difficult toachieve the second MDG objective on reduction of food poverty incidence to3% by 2010. This suggests that reduction of extreme poverty is more difficult thanthat of overall poverty. Households who have very low income can be chronicallypoor.
B. Poverty Estimation under Assumption of High Inflation in 2008 andEconomic Stagnation
1. MethodologyTo estimate the effect of high inflation on poverty in 2008, we take the following
steps:(i) Estimate the nominal income of households by:
ˆ ˆ( ) ( )
( )_ ( )Y YP Y P Y Y
iN
iR F i A NF i NA i
2008 20082006 2006=
( ) + ( ) +π π π_ (( )
( )
,2006
2006
_W
iY(6)
where ˆ( )YiN2008 and ˆ
( )YiR2008 are the nominal and real per capita incomes of household
i, respectively. ˆ( )YiR2008 is estimated in Section IV. A.2. The subscripts “2006” and
“2008” refer to the years 2006 and 2008, respectively. PF and PNF are the ratios ofthe actual inflation to the expected inflation of food and nonfood commoditiesduring the period 2006–08, respectively. The expected inflation rate of food andnonfood commodities of the period 2006–08 is assumed to be the same as theactual inflation rate of the period 2004–06. These ratios for food and nonfood itemsare 1.25 and 1.06, respectively (see Appendix Table 4 for CPI during the period2002–09). p is the expected CPI of the whole economy during the period 2006–08with 2006 as the base year (CPI = 100). p is assumed to be equal to the actualinflation rate of the whole economy during the period 2004–06 (estimated ataround 116.6, see Appendix Table 4). Yi(2006)_A and Yi(2006)_NA are income from
vietnam’s mdg on poverty reduction 307
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
TAB
LE
5
Pred
icte
dPo
vert
yin
2010
Bas
edon
Pane
lD
ata
VH
LSS
s20
02an
d20
06:W
ithou
tE
cono
mic
Stag
natio
n
Are
asO
vera
llPo
vert
yFo
odPo
vert
y
P0
(%)
P1
P2
P0
(%)
P1
P2
Rur
al/U
rban
:R
ural
13.7
[0.8
]0.
0368
[0.0
028]
0.01
47[0
.001
4]6.
5[0
.5]
0.01
57[0
.001
7]0.
0058
[0.0
008]
Urb
an2.
3[0
.6]
0.00
49[0
.001
5]0.
0017
[0.0
006]
0.8
[0.3
]0.
0016
[0.0
007]
0.00
05[0
.000
3]R
egio
n:R
edR
iver
Del
ta6.
7[0
.9]
0.01
51[0
.002
6]0.
0053
[0.0
011]
2.6
[0.5
]0.
0051
[0.0
013]
0.00
16[0
.000
5]N
orth
Eas
t16
.6[1
.6]
0.04
63[0
.005
5]0.
0191
[0.0
029]
8.2
[1.1
]0.
0206
[0.0
035]
0.00
79[0
.001
8]N
orth
Wes
t30
.9[3
.9]
0.09
68[0
.015
8]0.
0425
[0.0
084]
17.7
[3.1
]0.
0477
[0.0
102]
0.01
88[0
.004
9]N
orth
Cen
tral
Coa
st16
.2[1
.8]
0.04
49[0
.006
2]0.
0182
[0.0
032]
8.1
[1.2
]0.
0197
[0.0
039]
0.00
73[0
.001
9]So
uth
Cen
tral
Coa
st9.
3[1
.4]
0.02
44[0
.004
2]0.
0097
[0.0
021]
4.2
[0.8
]0.
0102
[0.0
025]
0.00
39[0
.001
3]C
entr
alH
ighl
ands
15.7
[2.2
]0.
0467
[0.0
076]
0.02
02[0
.004
0]8.
3[1
.5]
0.02
23[0
.004
9]0.
0090
[0.0
025]
Sout
hE
ast
4.3
[0.8
]0.
0105
[0.0
024]
0.00
39[0
.001
1]1.
8[0
.5]
0.00
41[0
.001
3]0.
0014
[0.0
006]
Mek
ong
Riv
erD
elta
8.7
[1.1
]0.
0205
[0.0
030]
0.00
74[0
.001
3]3.
5[0
.6]
0.00
74[0
.001
5]0.
0024
[0.0
006]
All
Vie
tnam
10.6
[0.6
]0.
0283
[0.0
021]
0.01
12[0
.001
1]5.
0[0
.4]
0.01
19[0
.001
3]0.
0044
[0.0
006]
Sour
ce:
Est
imat
ions
from
VH
LSS
s20
02an
d20
06.
Not
e:St
anda
rder
rors
inbr
acke
ts(S
tand
ard
erro
rsar
eca
lcul
ated
byus
ing
boot
stra
pw
ith50
0re
plic
atio
ns.S
tand
ard
erro
rsar
eco
rrec
ted
for
sam
plin
gw
eigh
tsan
dcl
uste
rco
rrel
atio
n).
308 the developing economies
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
TAB
LE
6
Pred
icte
dPo
vert
yin
2006
Bas
edon
Pane
lD
ata
VH
LSS
s20
02an
d20
04
Are
asO
vera
llPo
vert
yFo
odPo
vert
y
P0
(%)
P1
P2
P0
(%)
P1
P2
Rur
al/U
rban
:R
ural
21.5
[0.8
]0.
0620
[0.0
031]
0.02
60[0
.001
6]11
.1[0
.6]
0.02
85[0
.002
0]0.
0109
[0.0
010]
Urb
an3.
5[0
.5]
0.00
78[0
.001
5]0.
0027
[0.0
007]
1.3
[0.3
]0.
0027
[0.0
008]
0.00
09[0
.000
3]R
egio
n:R
edR
iver
Del
ta8.
8[0
.9]
0.02
00[0
.002
5]0.
0069
[0.0
011]
3.4
[0.5
]0.
0067
[0.0
013]
0.00
21[0
.000
5]N
orth
Eas
t26
.4[1
.5]
0.07
82[0
.005
9]0.
0330
[0.0
032]
14.2
[1.2
]0.
0364
[0.0
040]
0.01
39[0
.002
0]N
orth
Wes
t42
.3[3
.0]
0.14
37[0
.014
4]0.
0659
[0.0
084]
26.5
[2.9
]0.
0755
[0.0
105]
0.03
07[0
.005
4]N
orth
Cen
tral
Coa
st28
.7[2
.0]
0.08
86[0
.007
8]0.
0387
[0.0
043]
16.0
[1.6
]0.
0433
[0.0
053]
0.01
72[0
.002
7]So
uth
Cen
tral
Coa
st14
.6[1
.5]
0.03
80[0
.004
5]0.
0147
[0.0
022]
6.8
[0.9
]0.
0155
[0.0
027]
0.00
55[0
.001
3]C
entr
alH
ighl
ands
27.0
[2.1
]0.
0907
[0.0
092]
0.04
24[0
.005
5]16
.3[1
.8]
0.04
83[0
.006
8]0.
0207
[0.0
037]
Sout
hE
ast
5.9
[0.7
]0.
0155
[0.0
023]
0.00
62[0
.001
2]2.
7[0
.5]
0.00
66[0
.001
5]0.
0025
[0.0
008]
Mek
ong
Riv
erD
elta
13.8
[1.1
]0.
0340
[0.0
034]
0.01
25[0
.001
6]6.
0[0
.7]
0.01
28[0
.001
9]0.
0042
[0.0
008]
All
Vie
tnam
16.7
[0.6
]0.
0476
[0.0
023]
0.01
98[0
.001
2]8.
5[0
.5]
0.02
16[0
.001
5]0.
0083
[0.0
007]
Sour
ce:
Est
imat
ions
from
VH
LSS
s20
02an
d20
04.
Not
e:St
anda
rder
rors
inbr
acke
ts(S
tand
ard
erro
rsar
eca
lcul
ated
byus
ing
boot
stra
pw
ith50
0re
plic
atio
ns.S
tand
ard
erro
rsar
eco
rrec
ted
for
sam
plin
gw
eigh
tsan
dcl
uste
rco
rrel
atio
n).
vietnam’s mdg on poverty reduction 309
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
agricultural and nonagricultural productive activities of the household i. Yi(2006)_W
are wages/salaries, subsidy, remittances, and other income sources.Equation (6) makes several assumptions. First, it assumes that if there is no
inflation shock, the actual inflation rate is equal to the expected inflation rate. Then,the nominal income is equal to the real income multiplied by the overall inflationrate. However, when there are price shocks (which can be a sudden increase ordecrease in prices), the ratios PF and PNF will be different from one. Householdswho produce agricultural and nonagricultural products can increase their nominalincome if the actual prices of commodities increase more than the expected prices.The change in the consumer’s price is associated with a change in the producer’sprice (Deaton 1989). Second, wages, subsidies, remittances, and other incomesources are assumed to increase by the expected inflation rate of the economy.Wages cannot be adjusted for price shocks that take place during a short period. Inmost studies, people who receive a wage or salary are assumed to be most affectedby inflation. Third, equation (6) assumes that the structure of income sources ofhouseholds in 2008 is the same as that in 2006.(ii) Estimate the nominal per capita expenditure as follows:
ˆ ˆ ,( ) ( )( )
( )
C YC
YiN
iN i
i2008 2008
2006
2006
=(7)
where ˆ( )CiN
2008 and Ci(2006) are the nominal per capita expenditure in 2008 and percapita expenditure in 2006 of household i, respectively.(iii) Estimate the real per capita expenditure:
ˆ ˆ( ) ( )
( ) ( )
(
C CC P C P
CiR
iN i F F i NF NF
i2008 2008
2006 2006
2
=( ) + ( )_ _π π
0006)
, (8)
where Ci(2006)_F and Ci(2006)_NF are per capita expenditure on food and nonfoodconsumption of household i in 2006, respectively. Equation (8) indicates that thereal expenditure will decrease if the actual increase in prices is higher than theexpected increase in prices.(iv) Poverty indexes are estimated by using the predicted per capita expenditure
from step (iii).If we combine equations (6), (7), and (8), we get:
ˆ ˆ( ) ( )
( )
( )( )C Y
C
YP S Pi
RiR i
iF i A
Y2008 2008
2006
20062006=
⎡
⎣⎢
⎤
⎦⎥ +_ NNF i NA
Yi WY
i FC
F
i NFC
NF
S S
S
P
S
P
( ) ( )
( ) ( )
2006 2006
2006 2006
_ _
_ _
+( )
+⎛⎛⎝⎜
⎞⎠⎟
.(9)
310 the developing economies
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
This equation shows that the effect of price shocks on the real consumption ofa household depends on the structures of household income and consumption.Intuitively, if the price of a commodity increases suddenly, households whoproduce a large amount of this commodity and consume a small amount of it willbenefit from the price increase. In a short period, an increase in the price of acommodity can increase or decrease the real consumption of a household, depend-ing on whether the household produces or consumes the commodity.
It should be noted that equations (7) and (8) assume that the ratio of expenditureto income and the ratio of food expenditure to total expenditure are unchangedduring 2006–08. Because of high inflation, households can increase the ratio ofexpenditure to income and the ratio of food items to total consumption. If so, therealized poverty will be lower than the estimated poverty based on the aboveprocedure.
In addition, the paper assumes that inflation does not have macroeconomicimpacts such as unemployment or decreases in demand and supply. This is areasonable assumption since high inflation has happened in the first six months of2008, and there is low inflation during the last months of 2008. In addition, moststudies mention that the main reason for high inflation is an excess of money supply.2
As mentioned, the poverty prediction method assumes that macroeconomicchanges during 2002–06 and macroeconomic changes during 2006–10 are thesame. The GDP per capita increased by 29.6% from 2002 to 2006 (GSO 2010). Ifthere had been no economic slowdown, Vietnam would also have the growth rateof GDP per capita of 29.6% during the period 2006–10. To project poverty in 2010in the case of economic stagnation in 2009, the paper assumes that the growth rateof GDP per capita during 2006–10 is equal to the growth rate from 2002 to 2006if its third year (the year 2005) would have experienced a similar growth slowdownas 2009. In 2009, the growth rate of GDP per capita was 4.2% (GSO 2010). Thus,the growth rate of GDP per capita in the period 2006–10 is 26.1%. Per capitaincome in 2010 in the presence of economic stagnation is approximately per capitaincome in the absence of economic stagnation for 2010 multiplied by (129.6/126.1). Per capita income in the absence of economic stagnation is projected inSection IV. A.2. Then, per capita expenditure and poverty indexes are predictedbased on this projected per capita income.
This estimation approach relies on an assumption that the effect of economicstagnation on per capita income is the same as that for households. This is arather strong assumption. However, the poor as well as low-income people are a
2 For example, the money supply (M1) of Vietnam increased by 46% in 2007 (http://www.bbc.co.uk/vietnamese/vietnam/story/2008/03/080303_ftinterviewnguyentandung.shtml).
vietnam’s mdg on poverty reduction 311
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
homogenous group, who are mainly rural and agricultural households. It isexpected that the effect of economic slowdown on income and consumption issimilar to that for different poor households.
2. Estimation resultsTable 7 presents the structure of income and consumption expenditure for the
poor and nonpoor in 2006. The poor have a larger proportion of agriculturalincome than that of the nonpoor. Income from agricultural production and businessaccounted for 30.8% and 53.4% of the total income for the nonpoor and the poor,respectively. By contrast, the ratio of nonagricultural income to total income of thepoor was smaller than that of the nonpoor. This implies that inflation can increasethe nominal income by a larger rate for the poor than that for the nonpoor.However, the poor tended to have larger expenditure on food consumption. Theshare of food consumption in total consumption was 46.4% and 65% for thenonpoor and poor, respectively.
Table 8 presents the estimates of poverty indexes in 2008 in the presence ofhigh inflation. It shows that high inflation increases the poverty indexes (see alsoTable 4). High inflation increases the overall poverty incidence by 1.5 percentagepoints from 13.6% to 15.1%. The overall poverty incidences for the rural andurban areas are also increased to 18.9% and 4.5%, respectively. Due to inflation,the food poverty incidence increases slightly from 6.5% to 7.1%. Povertyindexes in the case of high inflation are rather similar to poverty indexes in 2006.In other words, high inflation in 2008 almost negates the effect of income growth
TABLE 7
Structure of Income and Consumption by the Poor and Nonpoorin 2006 (%)
Nonpoor Poor Total
Structure in income:Wage 31.9 29.5 31.5Agricultural activities 30.8 53.4 34.4Nonagricultural activities 37.3 17.1 34.1Sub-total 100 100 100
Structure in consumption:Food 46.4 65.0 49.3Nonfood 53.6 35.0 50.7Sub-total 100 100 100
Ratio of consumption:expenditure to income
78.5 72.1 77.5
Source: Estimation from VHLSS 2006.
312 the developing economies
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
TAB
LE
8
Pred
icte
dPo
vert
yin
2008
Bas
edon
Pane
lD
ata
VH
LSS
s20
04–0
6:W
ithH
igh
Infla
tion
in20
08
Are
asO
vera
llPo
vert
yFo
odPo
vert
y
P0
(%)
P1
P2
P0
(%)
P1
P2
Rur
al/U
rban
Rur
al18
.9[0
.6]
0.05
11[0
.002
3]0.
0203
[0.0
012]
9.1
[0.5
]0.
0217
[0.0
014]
0.00
79[0
.000
7]U
rban
4.5
[0.5
]0.
0099
[0.0
014]
0.00
34[0
.000
6]1.
7[0
.3]
0.00
33[0
.000
8]0.
0010
[0.0
003]
Reg
ion
Red
Riv
erD
elta
11.9
[0.9
]0.
0278
[0.0
027]
0.00
98[0
.001
2]4.
8[0
.6]
0.00
97[0
.001
5]0.
0031
[0.0
006]
Nor
thE
ast
19.4
[1.4
]0.
0516
[0.0
048]
0.02
03[0
.002
4]9.
2[1
.0]
0.02
16[0
.002
9]0.
0078
[0.0
014]
Nor
thW
est
35.4
[3.3
]0.
1096
[0.0
131]
0.04
73[0
.007
0]20
.2[2
.7]
0.05
28[0
.008
7]0.
0202
[0.0
041]
Nor
thC
entr
alC
oast
23.7
[1.6
]0.
0679
[0.0
062]
0.02
80[0
.003
3]12
.3[1
.3]
0.03
06[0
.004
2]0.
0114
[0.0
020]
Sout
hC
entr
alC
oast
14.1
[1.4
]0.
0358
[0.0
042]
0.01
36[0
.002
0]6.
3[0
.9]
0.01
42[0
.002
5]0.
0050
[0.0
011]
Cen
tral
Hig
hlan
ds20
.9[2
.1]
0.06
47[0
.007
7]0.
0285
[0.0
042]
11.7
[1.6
]0.
0318
[0.0
051]
0.01
28[0
.002
7]So
uth
Eas
t7.
5[0
.8]
0.01
96[0
.002
5]0.
0078
[0.0
013]
3.4
[0.5
]0.
0083
[0.0
016]
0.00
31[0
.000
9]M
ekon
gR
iver
Del
ta11
.9[0
.9]
0.02
83[0
.002
7]0.
0101
[0.0
013]
4.9
[0.6
]0.
0102
[0.0
015]
0.00
33[0
.000
6]A
llV
ietn
am15
.1[0
.5]
0.04
01[0
.001
7]0.
0158
[0.0
009]
7.1
[0.4
]0.
0168
[0.0
011]
0.00
61[0
.000
5]
Sour
ce:
Est
imat
ions
from
VH
LSS
s20
02,2
004,
and
2006
.N
otes
:1.
Stan
dard
erro
rsin
brac
kets
(Sta
ndar
der
rors
are
calc
ulat
edby
usin
gbo
otst
rap
with
500
repl
icat
ions
.Sta
ndar
der
rors
are
corr
ecte
dfo
rsa
mpl
ing
wei
ghts
and
clus
ter
corr
elat
ion)
.2.
P0:
pove
rty
inci
denc
e;P
1:po
vert
yga
pin
dex;
P2:
pove
rty
seve
rity
inde
x.
vietnam’s mdg on poverty reduction 313
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
on poverty reduction during 2006–08. However, Vietnam might still achievethe first objective of the MDGs to reduce the poverty incidence to 16%by 2008.
At the regional level, all regions have increased poverty due to inflation. Theincrease in the overall and food poverty incidences is very similar across theregions.
Table 9 presents the estimation of poverty indexes when there is economicstagnation but no high inflation during 2008–09. The paper assumes that in thelong run, people can adjust real income to ensure real consumption, and the effectof inflation will be mitigated. The incidence of overall poverty may be 11.4% in2010. This means that economic stagnation can increase the poverty incidence byaround 0.8 percentage points (see Table 5). If there is high inflation, the povertyincidence can be nearly 13%. This estimate is still statistically smaller than theMDGs’ target of 16%.
Economic stagnation may also increase the food poverty incidence in 2010from 5.0% to 5.4%. The estimate of the food poverty incidence is statisticallysignificantly higher than the MDGs’ target of 3%. Thus it is possible thatVietnam cannot achieve the MDGs of food poverty reduction by 2010.Again, these results should be used with great caution since the panel dataVHLSSs 2002 and 2006 which are used for the regression analysis contain fewobservations.
V. CONCLUSION
This paper uses the three recent VHLSSs in 2002, 2004, and 2006 to forecastpoverty in 2008 and 2010 to examine whether Vietnam can achieve its MDGs onpoverty reduction. The forecasts take into account high inflation in 2008 andeconomic stagnation during 2008–09. It is found that high inflation can increasethe overall poverty rate in 2008 by around 1.5 percentage points. However,Vietnam is able to achieve its MDGs on reduction of overall poverty by 2008since the projected poverty incidence in 2008 is 15.1% in the presence of highinflation. Because of low economic growth in 2009, the overall poverty incidenceis projected at around 11.4% in 2010. This means that Vietnam can successfullyachieve the MDGs on reduction of overall poverty. However, the MDGs on foodpoverty reduction might not be achieved since the estimate of the food povertyincidence is statistically higher than the target rate of 3%.
Of course, if high inflation and economic crisis had happened during the period2008–10, Vietnam might not have achieved the MDGs on both overall and foodpoverty reduction. In this case, income redistribution might be important measureto maintain poverty reduction.
314 the developing economies
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
TAB
LE
9
Pred
icte
dPo
vert
yin
2010
Bas
edon
Pane
lD
ata
VH
LSS
s20
02–0
6:W
ithE
cono
mic
Cri
sis
Are
asO
vera
llPo
vert
yFo
odPo
vert
y
P0
(%)
P1
P2
P0
(%)
P1
P2
Rur
al/U
rban
Rur
al14
.7[0
.8]
0.03
99[0
.003
0]0.
0161
[0.0
015]
7.1
[0.6
]0.
0173
[0.0
018]
0.00
65[0
.000
9]U
rban
2.5
[0.6
]0.
0055
[0.0
016]
0.00
19[0
.000
7]0.
9[0
.3]
0.00
18[0
.000
7]0.
0006
[0.0
003]
Reg
ion
Red
Riv
erD
elta
7.3
[1.0
]0.
0168
[0.0
028]
0.00
59[0
.001
2]2.
9[0
.6]
0.00
58[0
.001
4]0.
0019
[0.0
005]
Nor
thE
ast
17.7
[1.6
]0.
0500
[0.0
057]
0.02
08[0
.003
0]8.
9[1
.1]
0.02
26[0
.003
7]0.
0087
[0.0
019]
Nor
thW
est
32.5
[4.0
]0.
1034
[0.0
164]
0.04
59[0
.008
9]18
.9[3
.2]
0.05
17[0
.010
8]0.
0206
[0.0
052]
Nor
thC
entr
alC
oast
17.3
[1.8
]0.
0485
[0.0
065]
0.01
99[0
.003
4]8.
7[1
.3]
0.02
16[0
.004
1]0.
0081
[0.0
020]
Sout
hC
entr
alC
oast
10.1
[1.4
]0.
0265
[0.0
044]
0.01
06[0
.002
2]4.
6[0
.9]
0.01
12[0
.002
7]0.
0043
[0.0
014]
Cen
tral
Hig
hlan
ds16
.7[2
.3]
0.05
01[0
.007
9]0.
0219
[0.0
042]
8.9
[1.5
]0.
0242
[0.0
051]
0.00
98[0
.002
6]So
uth
Eas
t4.
7[0
.9]
0.01
15[0
.002
5]0.
0043
[0.0
012]
2.0
[0.5
]0.
0045
[0.0
014]
0.00
16[0
.000
6]M
ekon
gR
iver
Del
ta9.
5[1
.1]
0.02
26[0
.003
2]0.
0082
[0.0
014]
3.9
[0.6
]0.
0083
[0.0
017]
0.00
28[0
.000
7]A
llV
ietn
am11
.4[0
.6]
0.03
07[0
.002
2]0.
0123
[0.0
011]
5.4
[0.4
]0.
0131
[0.0
013]
0.00
49[0
.000
6]
Sour
ce:
Est
imat
ions
from
VH
LSS
s20
02,2
004,
and
2006
.N
otes
:1.
Stan
dard
erro
rsin
brac
kets
(Sta
ndar
der
rors
are
calc
ulat
edby
usin
gbo
otst
rap
with
500
repl
icat
ions
.Sta
ndar
der
rors
are
corr
ecte
dfo
rsa
mpl
ing
wei
ghts
and
clus
ter
corr
elat
ion)
.2.
P0:
pove
rty
inci
denc
e;P
1:po
vert
yga
pin
dex;
P2:
pove
rty
seve
rity
inde
x.
vietnam’s mdg on poverty reduction 315
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
REFERENCES
Barham, Bradford, and Stephen Boucher. 1998. “Migration, Remittances and Inequality:Estimating the Net Effects of Migration on Income Distribution.” Journal of Develop-ment Economics 55, no. 2: 307–31.
Deaton, Angus. 1989. “Rice Prices and Income Distribution in Thailand: A Non-ParametricAnalysis.” Economic Journal 99, 1–37.
Elbers, Chris; Jean O. Lanjouw; and Peter Lanjouw. 2003. “Micro-Level Estimation ofPoverty and Inequality.” Econometrica 71, no. 1: 355–64.
Foster, James; Joel Greer; and Erik Thorbecke. 1984. “A Class of Decomposable PovertyMeasures.” Econometrica 52, no. 3: 761–66.
General Statistics Office of Vietnam (GSO). 2010. Statistical Yearbook of Vietnam in 2009.Hanoi: Statistical Publishing House.
Hentschel, Jesko; Jean Olson Lanjouw; Peter Lanjouw; and Javier Poggi. 2000. “Combin-ing Census and Survey Data to Trace the Spatial Dimensions of Poverty: A Case Studyof Ecuador.” World Bank Economic Review 14, no. 1: 147–65.
Hertel, Thomas W., and L. Alan Winters, eds. 2006. Poverty and the WTO: Impacts of theDoha Development Agenda. Basingstoke: Palgrave-Macmillan; Washington, D.C.:World Bank.
Ivanic, Maros, and Will Martin. 2008. “Implications of Higher Global Food Prices forPoverty in Low-Income Countries.” Policy Research Working Paper no. 4594. Wash-ington, D.C.: World Bank.
Minot, Nicholas, and Francesco Goletti. 2000. “Rice Market Liberalization and Poverty inViet Nam.” IFPRI Research Report no. 114. Washington, D.C.: International FoodPolicy Research Institute.
Ravallion, Martin, and Michael Lokshin. 2004. “Gainers and Losers from Trade Reform inMorocco.” Policy Research Working Paper no. 3368. Washington, D.C.: World Bank.
Vu, Linh H., and Paul Glewwe. 2009. “Impacts of Rising Food Prices on Poverty andWelfare in Vietnam.” DEPOCEN Working Paper no. 13. Hanoi: Development andPolicies Research Center.
World Bank. 2003. Vietnam Development Report 2004: Poverty. Hanoi: Vietnam Devel-opment Information Center, World Bank.
———. 2007. Vietnam Development Report 2008: Social Protection. Hanoi: VietnamDevelopment Information Center, World Bank.
316 the developing economies
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
APPENDIX TABLE 1
Variable Description
Variables TypeMean and Standard Error
2002 2004 2006
Logarithm of per capita income (in price of 2006) Continuous 8.347 [0.007] 8.560 [0.013] 8.738 [0.010]Per capita income (thousand VND) (in price of 2006) Continuous 5571.3 [70.3] 6843.6 [120.9] 7992.1 [100.7]Per capita income (thousand VND) (in price of 2006) Continuous 4315.5 [43.3] 5170.4 [82.9] 5846.9 [79.2]Ratio of members working in agriculture to the total
number of members between 14 and 61Continuous 0.552 [0.005] 0.504 [0.007] 0.479 [0.007]
Ethnic minorities (not Kinh/Chinese) (Yes = 1) Binary 0.126 [0.004] 0.126 [0.005] 0.135 [0.006]Household size Discrete 5.124 [0.020] 5.014 [0.025] 4.868 [0.027]Ratio of children under 15 years old in household Continuous 0.291 [0.002] 0.266 [0.003] 0.241 [0.003]Ratio of people over 60 years old in household Continuous 0.087 [0.001] 0.093 [0.002] 0.097 [0.002]Ratio of female members in household Continuous 0.505 [0.001] 0.505 [0.002] 0.510 [0.002]Head without education degree Binary 0.316 [0.005] 0.289 [0.006] 0.263 [0.006]Head with primary school degree Binary 0.244 [0.004] 0.245 [0.005] 0.253 [0.005]Head with lower-secondary school Binary 0.265 [0.004] 0.248 [0.005] 0.265 [0.006]Head with upper secondary school Binary 0.084 [0.003] 0.075 [0.003] 0.078 [0.003]Head with technical degree Binary 0.055 [0.002] 0.100 [0.004] 0.098 [0.004]Head with post-secondary school Binary 0.036 [0.002] 0.043 [0.003] 0.044 [0.003]Ratio of members with lower secondary school Continuous 0.201 [0.002] 0.205 [0.003] 0.216 [0.003]Ratio of members with upper secondary school Continuous 0.079 [0.001] 0.086 [0.002] 0.094 [0.002]Ratio of members with technical degree Continuous 0.031 [0.001] 0.058 [0.002] 0.067 [0.002]Ratio of members with post secondary school Continuous 0.024 [0.001] 0.032 [0.002] 0.034 [0.002]Area of house (m2) Discrete 58.8 [0.5] 63.0 [0.6] 66.1 [0.6]Permanent house Binary 0.168 [0.004] 0.208 [0.006] 0.234 [0.006]Semi-permanent house Binary 0.598 [0.005] 0.596 [0.007] 0.611 [0.007]Temporary house Binary 0.234 [0.005] 0.196 [0.006] 0.156 [0.005]Tap water Binary 0.168 [0.005] 0.189 [0.007] 0.223 [0.008]Clean water Binary 0.593 [0.007] 0.643 [0.008] 0.642 [0.009]Other water Binary 0.239 [0.005] 0.168 [0.006] 0.135 [0.005]Area of annual crop land (m2) Continuous 0.664 [0.014] 0.669 [0.018] 0.696 [0.020]Area of perennial crop land (m2) Continuous 0.229 [0.009] 0.202 [0.015] 0.238 [0.014]Area of forestry land (m2) Continuous 0.220 [0.021] 0.195 [0.022] 0.214 [0.026]Distance from village to the nearest market (km) Continuous 2.183 [0.096] 2.198 [0.095] 2.345 [0.101]Village with road (Yes = 1) Binary 0.667 [0.006] 0.912 [0.005] 0.907 [0.005]Household in urban areas Binary 0.232 [0.002] 0.258 [0.010] 0.267 [0.010]Red River Delta Binary 0.219 [0.002] 0.218 [0.007] 0.216 [0.007]North East Binary 0.119 [0.001] 0.114 [0.004] 0.115 [0.004]North West Binary 0.027 [0.001] 0.030 [0.002] 0.032 [0.002]North Central Coast Binary 0.134 [0.002] 0.129 [0.006] 0.132 [0.006]South Central Coast Binary 0.085 [0.001] 0.086 [0.005] 0.085 [0.005]Central Highlands Binary 0.058 [0.001] 0.056 [0.004] 0.060 [0.005]South East Binary 0.146 [0.002] 0.159 [0.009] 0.159 [0.008]Mekong River Delta Binary 0.212 [0.002] 0.208 [0.007] 0.201 [0.007]Number of observations 29,533 9,188 9,189
Source: Estimations from VHLSSs 2002, 2004, and 2006.Note: Standard errors in brackets (Standard errors are corrected for sampling weights and cluster correlation).
vietnam’s mdg on poverty reduction 317
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
APP
EN
DIX
TAB
LE
2
Reg
ress
ions
ofL
ogof
Per
Cap
itaIn
com
e
Inde
pend
ent
Var
iabl
esD
epen
dent
Var
iabl
eof
2004
and
Inde
pend
ent
Var
iabl
esof
2002
:Pa
nel
Dat
a20
02–0
4
Dep
ende
ntV
aria
ble
of20
06an
dIn
depe
nden
tV
aria
bles
of20
04:
Pane
lD
ata
2004
–06
Dep
ende
ntV
aria
ble
of20
06an
dIn
depe
nden
tV
aria
bles
of20
02:
Pane
lD
ata
2002
–06
Log
arith
mof
per
capi
tain
com
e0.
463*
**[0
.020
]0.
529*
**[0
.019
]0.
404*
**[0
.030
]E
thni
cm
inor
ities
(not
Kin
h/C
hine
se)
(Yes
=1)
-0.1
59**
*[0
.028
]-0
.159
***
[0.0
28]
-0.1
45**
*[0
.043
]H
ouse
hold
size
-0.0
13**
[0.0
06]
0.00
4[0
.005
]0.
003
[0.0
08]
Rat
ioof
child
ren
unde
r15
year
sol
din
hous
ehol
d-0
.147
***
[0.0
55]
-0.1
70**
*[0
.051
]-0
.165
*[0
.089
]R
atio
ofpe
ople
over
60ye
ars
old
inho
useh
old
-0.1
00*
[0.0
52]
-0.0
23[0
.047
]-0
.067
[0.0
88]
Rat
ioof
fem
ale
mem
bers
inho
useh
old
-0.0
73*
[0.0
40]
0.01
8[0
.037
]0.
075
[0.0
64]
Age
ofhe
ad-0
.001
[0.0
01]
-0.0
02**
*[0
.001
]-0
.001
[0.0
01]
Hea
dw
ithou
ted
ucat
ion
degr
eeO
mitt
edH
ead
with
prim
ary
scho
olde
gree
0.02
3[0
.023
]-0
.007
[0.0
21]
0.06
3*[0
.037
]H
ead
with
low
er-s
econ
dary
scho
ol0.
087*
**[0
.033
]0.
02[0
.030
]0.
062
[0.0
51]
Hea
dw
ithup
per
seco
ndar
ysc
hool
0.02
2[0
.042
]-0
.049
[0.0
41]
0.02
7[0
.066
]H
ead
with
tech
nica
lde
gree
0.06
6[0
.053
]0.
045
[0.0
41]
0.06
9[0
.081
]H
ead
with
post
-sec
onda
ryde
gree
0.17
1***
[0.0
60]
0.11
2**
[0.0
57]
0.29
5***
[0.1
09]
Rat
ioof
mem
bers
with
low
erse
cond
ary
scho
ol0.
217*
[0.1
17]
0.25
8***
[0.0
77]
0.27
3[0
.177
]R
atio
ofm
embe
rsw
ithup
per
seco
ndar
ysc
hool
0.37
6***
[0.1
13]
0.46
8***
[0.0
92]
0.34
1*[0
.192
]R
atio
ofm
embe
rsw
ithte
chni
cal
degr
ee0.
310*
**[0
.068
]0.
283*
**[0
.065
]0.
396*
**[0
.097
]R
atio
ofm
embe
rsw
ithpo
stse
cond
ary
scho
ol0.
07[0
.051
]0.
113*
*[0
.048
]0.
241*
**[0
.084
]A
rea
ofho
use
(m2 )
0.00
1***
[0.0
00]
0.00
1***
[0.0
00]
0[0
.000
]Pe
rman
ent
hous
e0.
085*
**[0
.032
]0.
090*
**[0
.028
]0.
136*
*[0
.053
]Se
mi-
perm
anen
tho
use
0.07
6***
[0.0
22]
0.04
0**
[0.0
19]
0.06
7**
[0.0
34]
Tem
pora
ryho
use
Om
itted
Tap
wat
er0.
119*
**[0
.033
]0.
054*
[0.0
30]
0.08
1[0
.050
]C
lean
wat
er0.
050*
*[0
.022
]0.
021
[0.0
22]
0.01
7[0
.034
]U
ncle
anw
ater
Om
itted
Are
aof
pere
nnia
lcr
opla
nd(m
2 )0.
013
[0.0
08]
0.01
8***
[0.0
06]
0.01
2[0
.010
]A
rea
ofan
nual
crop
land
(m2 )
0.03
5***
[0.0
07]
0.02
8***
[0.0
08]
0.02
7*[0
.015
]A
rea
offo
rest
ryla
nd(m
2 )0.
003
[0.0
05]
0.00
2[0
.003
]-0
.009
[0.0
09]
Rat
ioof
mem
bers
wor
king
inag
ricu
lture
toth
eto
tal
num
ber
ofm
embe
rsbe
twee
n14
and
61-0
.096
***
[0.0
25]
-0.0
43*
[0.0
22]
-0.1
17**
*[0
.040
]
Vill
age
with
road
(yes
=1)
0.03
4[0
.028
]0.
012
[0.0
28]
0.10
3**
[0.0
44]
Dis
tanc
efr
omvi
llage
toth
ene
ares
tm
arke
t(k
m)
-0.0
02[0
.002
]-0
.005
***
[0.0
01]
-0.0
06**
*[0
.002
]H
ouse
hold
inur
ban
area
s0.
115*
**[0
.037
]0.
032
[0.0
26]
0.06
1[0
.058
]R
edR
iver
Del
taO
mitt
edN
orth
Eas
t-0
.060
**[0
.028
]0.
143*
**[0
.027
]0.
101*
*[0
.045
]N
orth
Wes
t-0
.043
[0.0
45]
0.10
9**
[0.0
46]
0.06
8[0
.066
]N
orth
Cen
tral
Coa
st-0
.152
***
[0.0
29]
0.04
[0.0
28]
0.02
7[0
.043
]So
uth
Cen
tral
Coa
st-0
.064
**[0
.030
]0.
066*
*[0
.029
]0.
045
[0.0
49]
Cen
tral
Hig
hlan
d-0
.048
[0.0
43]
0.16
3***
[0.0
39]
0.17
4***
[0.0
66]
Sout
hE
ast
0.09
5***
[0.0
33]
0.10
8***
[0.0
30]
0.16
1***
[0.0
54]
Mek
ong
Riv
erD
elta
0.04
[0.0
31]
0.16
1***
[0.0
28]
0.18
6***
[0.0
52]
Con
stan
t4.
575*
**[0
.176
]4.
075*
**[0
.175
]5.
094*
**[0
.276
]O
bser
vatio
ns4,
003
4,20
81,
872
R-s
quar
ed0.
540.
570.
44
Sour
ce:
Est
imat
ions
from
VH
LSS
s20
02,2
004,
and
2006
.N
ote:
Rob
ust
stan
dard
erro
rsin
brac
kets
(Sta
ndar
der
rors
are
corr
ecte
dfo
rsa
mpl
ing
wei
ghts
and
clus
ter
corr
elat
ion)
.**
*,**
,and
*re
pres
ent
stat
istic
alsi
gnifi
canc
eat
the
1%,5
%,a
nd10
%le
vel,
resp
ectiv
ely.
318 the developing economies
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
APPENDIX TABLE 3
Ratio of Per Capita Expenditure to Per Capita Income during 2002–06
Areas 2002 2004 2006
Rural/UrbanRural 0.87 0.88 0.87Urban 0.94 0.96 0.93
RegionRed River Delta 0.92 0.88 0.86North East 0.86 0.86 0.85North West 0.89 0.89 0.88North Central Coast 0.96 0.98 0.97South Central Coast 0.94 0.95 0.93Central Highlands 0.78 0.82 0.81South East 0.89 0.94 0.87Mekong River Delta 0.82 0.87 0.82All Vietnam 0.89 0.90 0.88
Estimates based on the 2002–06VHLSSs Panel Data
Estimates based on the 2004–06VHLSSs Panel Data
Mean of(Ci/Yi)
C Y
C Y
i i
i i
( ) ( )
( ) ( )
2006 2006
2002 2002−⎛⎝⎜
⎞⎠⎟
Mean of(Ci/Yi)
C Y
C Y
i i
i i
( ) ( )
( ) ( )
2006 2006
2004 2004−⎛⎝⎜
⎞⎠⎟
2002 2006 Mean Std. Dev. 2004 2006 Mean Std. Dev.
Rural/UrbanRural 0.94 0.93 -0.018 0.191 0.96 0.93 -0.011 0.179Urban 0.87 0.87 -0.031 0.204 0.85 0.85 -0.027 0.193
RegionRed River Delta 0.92 0.86 -0.025 0.200 0.92 0.86 0.009 0.190North East 0.86 0.85 -0.051 0.190 0.81 0.83 -0.055 0.180North West 0.89 0.88 -0.015 0.176 0.85 0.85 -0.033 0.192North Central Coast 0.96 0.97 -0.067 0.199 0.84 0.92 -0.080 0.181South Central Coast 0.94 0.93 -0.030 0.160 0.93 0.91 -0.021 0.172Central Highlands 0.78 0.81 -0.018 0.213 0.86 0.84 -0.038 0.208South East 0.89 0.87 -0.007 0.204 0.90 0.88 0.000 0.183Mekong River Delta 0.82 0.82 -0.003 0.207 0.87 0.86 -0.014 0.199All Vietnam 0.89 0.88 -0.028 0.201 0.88 0.87 -0.023 0.190
Note: Columns under (Ci(2006)/Yi(2006) - Ci(2002)/Yi(2002)) and (Ci(2006)/Yi(2006) - Ci(2004)/Yi(2004))calculate the averages and standard deviations of the household-level differences in the ratioof expenditure to income over time (not the difference in the mean and standard deviations).
vietnam’s mdg on poverty reduction 319
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies
APPENDIX TABLE 4
Average Consumer Price Index and the Growth of GDP Per Capita during 2002–09(Previous Year = 100)
2002 2003 2004 2005 2006 2007 2008 2009
Overall CPI 104.0 103.2 107.7 108.3 107.5 108.3 123.0 106.9Food CPI 105.7 102.5 112.4 111.3 108.7 111.2 136.6 108.7Nonfood CPI 102.4 103.8 103.2 105.4 106.3 105.6 109.9 105.1GDP per capita 105.8 106.1 106.5 107.2 107.0 107.3 106.2 104.2
Source: GSO (2010).
320 the developing economies
© 2011 The AuthorThe Developing Economies © 2011 Institute of Developing Economies