THE WORLD BANK ISBN 0-8213-5543-0 Economic Growth, Poverty, and Household Welfare in Vietnam GLEWWE/AGRAWAL/DOLLAR THE WORLD BANK Vietnam is an economic success story. It transformed itself from a country in the 1980s that was one of the world’s poorest to a country in the 1990s with one of the world’s highest growth rates. With the adoption of new, market-oriented policies in the late 1980s, Vietnam averaged an economic growth rate of 8 percent per year from 1990 to 2000. This economic growth was accompanied by a large reduction in poverty (from 58 percent in 1993 to 37 percent in 1998), which included dramatic increases in school enrollment and a rapid decrease in child malnutrition. Economic Growth, Poverty, and Household Welfare in Vietnam uses an unusually rich set of macroeconomic and household survey data to examine several topics. These include the causes of the economic turnaround and prospects for future growth; the impact of economic growth on household welfare, as measured by consumption expenditures, health, education, and other socioeconomic outcomes; and the nature of poverty in Vietnam and the effectiveness of government policies intended to reduce it. Although Vietnam’s past achievements are quite impressive, future progress is by no means ensured. This book draws lessons for Vietnam and for other low-income developing countries. It is a valuable resource for anyone—including those in the devel- opment community, academia, and the media—who is interested in economic policy, poverty reduction strategies, health care, education, and social safety nets. ™xHSKIMBy355435zv":;:&:%:. W ORLD BANK REGIONAL AND SECT ORAL STUDIES Economic Growth, Poverty, and Household Welfare in Vietnam EDITED BY PAUL GLEWWE NISHA AGRAWAL DAVID DOLLAR Economic Growth, Poverty , and Household Welfare in Vietnam WORLD BANK REGIONAL AND SECTORAL STUDIES Economic Growth, Poverty , and Household Welfare in Vietnam Edited by Paul Glewwe Nisha Agrawal David Dollar THE WORLD BANK Washington, D.C. © 2004 The International Bank for Reconstr uction and Development/ THE WORLD BANK 1818 H Street, NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org All rights reserved. 123407060504 The World Bank Regional and Sectoral Studies series provides an outlet for work that is relatively focused in its subject matter or geographic coverage and that con- tributes to the intellectual foundations of development operations and policy for- mulation. Some sources cited in this publication may be informal documents that are not readily available. The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank encourages dissemination of its work and will normally grant permission promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, telephone 978-750-8400, fax 978-750- 4470, www.copyright.com. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, World Bank, 1818 H Street, NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail pubrights@worldbank.org. ISBN 0-8213-5543-0 Cover credits: World Bank Photo Library Library of Congress Cataloging-in-Publication Data Economic growth, poverty, and household welfare in Vietnam / edited by Paul Glewwe, Nisha Agrawal, David Dollar. p. cm. – (World Bank regional and sectoral studies) Includes bibliographical references and index. ISBN 0-8213-5543-0 1. Vietnam—Economic policy. 2. Income distribution—Vietnam. 3. Poverty— Vietnam. 4. Households—Economic aspects—Vietnam. 5. Vietnam—Economic conditions—1975- I. Glewwe, Paul, 1958- II. Agrawal, Nisha. III. Dollar, David. IV. Series. HC444.E263 2004 330.9597—dc22 2003056887 Contents Foreword vii Acknowledgments ix Contributors xi Abbreviations and Acronyms xiii Map of Vietnam xvi 1. An Overview of Economic Growth and Household Welfare in Vietnam in the 1990s 1 Paul Glewwe Part I. Vietnam’s Economic Performance in the 1990s 27 2. Reform, Growth, and Poverty 29 David Dollar 3. The Wage Labor Market and Inequality in Vietnam 53 John Luke Gallup 4. Household Enterprises in Vietnam: Survival, Growth, and Living Standards 95 Wim P. M. Vijverberg and Jonathan Haughton 5. Agriculture and Income Distribution in Rural Vietnam under Economic Reforms: A Tale of Two Regions 133 Dwayne Benjamin and Loren Brandt v vi Contents Part II. Poverty Reduction in Vietnam in the 1990s 187 6. The Static and Dynamic Incidence of Vietnam’s Public Safety Net 189 Dominique van de Walle 7. The Spatial Distribution of Poverty in Vietnam and the Potential for Targeting 229 Nicholas Minot and Bob Baulch 8. Ethnic Minority Development in Vietnam: A Socioeconomic Perspective 273 Bob Baulch, Truong Thi Kim Chuyen, Dominique Haughton, and Jonathan Haughton Part III. Progress in Health and Education in Vietnam in the 1990s 311 9. Poverty and Survival Prospects of Vietnamese Children under Doi Moi 313 Adam Wagstaff and Nga Nguyet Nguyen 10. Child Nutrition, Economic Growth, and the Provision of Health Care Services in Vietnam 351 Paul Glewwe, Stefanie Koch, and Bui Linh Nguyen 11. Patterns of Health Care Use in Vietnam: Analysis of 1998 Vietnam Living Standards Survey Data 391 Pravin K. Trivedi 12. Trends in the Education Sector 425 Nga Nguyet Nguyen 13. An Investigation of the Determinants of School Progress and Academic Achievement in Vietnam 467 Paul Glewwe Part IV. Other Topics 503 14. Child Labor in Transition in Vietnam 505 Eric Edmonds and Carrie Turk 15. Economic Mobility in Vietnam 551 Paul Glewwe and Phong Nguyen 16. Private Interhousehold Transfers in Vietnam 567 Donald Cox List of Figures, Maps, and Tables 605 Index 615 Foreword Vietnam’s economic and social achievements in the 1990s are nothing short of amazing, arguably placing it among the top two or three performers among all developing countries. This success demands serious study in order to draw lessons for other developing countries. Fortunately, there are high-quality data available to undertake such a study, and this book has made full use of those data, especially the 1992–93 and 1997–98 Vietnam Living Standards Surveys, to document and understand Vietnam’s experi- ence and to provide policy recommendations for other low-income countries. This volume offers a very broad array of studies of Vietnam’s economy and society in the 1990s. It begins with four chapters on Vietnam’s eco- nomic performance, each focusing on a different topic: macroeconomic growth, wage labor markets, household enterprises, and agriculture. Of course, economic growth can take many forms, with widely differing con- sequences for poverty reduction. The next three chapters focus on poverty reduction in the 1990s, examining the impact (or lack thereof) of various poverty programs, the spatial distribution of poverty, and poverty among ethnic minorities. The next five chapters examine health and education out- comes. Three chapters on health consider child survival, child nutrition, and use of health care services, and two chapters on education cover basic trends in enrollment and financing and the factors that determine school progress and academic achievement. The last three chapters examine topics of particular interest in Vietnam: child labor, economic mobility, and inter- household transfers. As a whole, this book constitutes a comprehensive study of economic and social development in Vietnam in the 1990s. The research presented in this book involves the collaboration of numer- ous individuals and organizations. The two Vietnam Living Standards Surveys used in the book were implemented by Vietnam’s General Statistical Office, with financing from the United Nations Development vii viii Foreword Programme and the Swedish International Development Agency and tech- nical support from the World Bank. Funding for the research was obtained from the World Bank’s Research Committee. The results were first presented at a workshop in Hanoi in May 2001 that was attended by a wide range of government officials, international organizations, and individual researchers. The extensive use made of household survey data in this study raises the question of what data will be collected in the future in Vietnam. Fortunately, Vietnam’s General Statistical Office has developed, with assistance from the United Nations Development Programme and the World Bank, a plan for implementing similar household surveys every two years. The first survey, known as the Vietnam Household Living Standards Survey, was imple- mented in 2002 and preparations are now under way to implement another survey in 2004. This continued data collection will provide a sound foun- dation for study of Vietnam’s social and economic progress in the first decade of the 21st century. François J. Bourguignon Chief Economist and Senior Vice President The World Bank [...]... inequality in Vietnam in the 1980s, but the 1993 and 1998 VLSSs show what happened in the 1990s Table 1.2 8 Economic Growth, Poverty, and Household Welfare in Vietnam Table 1.2 Changes in Inequality in the 1990s Inequality index 1993 1998 Gini coefficient Theil index Decomposition of Theil index A Urban/Rural Within Between B Regions Within Between C Education of head of household Within Between D Ethnic... the incomes of most rural households in Vietnam, which helps explain why poverty decreased in rural areas in the 1990s In addition, poverty was reduced by the shifting patterns of agricul­ tural production, with increasingly intensive cultivation of rice in southern areas and shifts into nonrice crops in northern areas The authors also find that income inequality did not increase in rural areas of Vietnam; ... It finds that poorer households, almost all of whom are found in rural areas, rely on commune health centers for medical services, and better-off households are much more likely to use 16 Economic Growth, Poverty, and Household Welfare in Vietnam public hospitals, which are almost always found in urban areas Both rich and poor households spend most of their health care money on purchases of medicines... households, so that inequality in mortality rates across different income groups increased significantly in the 1990s Indeed, it appears that there has been no reduction in infant mortality among the poorest 25 percent of the population An Overview of Economic Growth and Household Welfare in Vietnam in the 1990s 15 The authors carefully examine the determinants of infant and child mor­ tality in Vietnam. .. Volume Vietnam s success in maintaining high economic growth and reducing poverty has already been described in other publications, such as a recent report by the World Bank and other donor agencies (World Bank 1999) The distinguishing characteristic of the chapters in this book is that they attempt 10 Economic Growth, Poverty, and Household Welfare in Vietnam to explain the reasons for this success and. .. higher in 1998 than in 1993 This chapter investigates the extent to which increased household incomes explain improvements in children’s nutritional status and then investigates what role other factors may have played to bring about those improvements Glewwe, Koch, and Nguyen find that growth in household incomes did not play a decisive role in reducing the incidence of stunting in Vietnam Using a variety... farming households and, more generally, reduced restrictions on agricultural markets Decree Number 5 of 1993 (often referred to as the 1993 Land Law) granted more An Overview of Economic Growth and Household Welfare in Vietnam in the 1990s 3 land rights and security Tenure lengths were extended to 20 years for an­ nual cropland and 50 years for perennial cropland Households were al­ lowed to rent out and. .. urban areas and mean per capita expenditures in rural areas; very little comes from increased inequality within urban and rural areas Three other decompositions of the Theil inequality index are shown in table 1.2 When Vietnam is divided into its seven economic regions (North­ ern Uplands, Red River Delta, North Central Coast, Central Coast, Central An Overview of Economic Growth and Household Welfare in. .. Vietnam Health Insurance Vietnam Health Sector Review Vietnam Living Standards Surveys World Health Organization World Trade Organization Map of Vietnam 1 An Overview of Economic Growth and Household Welfare in Vietnam in the 1990s Paul Glewwe In the 1980s, Vietnam was one of the poorest countries in the world, and throughout most of that decade there was little indication that Vietnamese households had... 13 examine progress in health and education in Vietnam in the 1990s Dramatic progress occurred in both sectors in that decade, but there is room for further progress, and there are some signs that inequality in health and education outcomes is increasing Adam Wagstaff and Nga Nguyet Nguyen examine infant and child mor­ tality in Vietnam in chapter 9 Compared with other low-income countries, Vietnam s . Poverty, and Household Welfare in Vietnam EDITED BY PAUL GLEWWE NISHA AGRAWAL DAVID DOLLAR Economic Growth, Poverty , and Household Welfare in Vietnam WORLD BANK REGIONAL AND SECTORAL. of Vietnam xvi 1. An Overview of Economic Growth and Household Welfare in Vietnam in the 1990s 1 Paul Glewwe Part I. Vietnam s Economic Performance in the 1990s 27 2. Reform, Growth, and Poverty. malnutrition. Economic Growth, Poverty, and Household Welfare in Vietnam uses an unusually rich set of macroeconomic and household survey data to examine several topics. These include the causes of the economic