UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HUGE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROJECT FOR M.A IN DEVELOPMENT ECONOMICS INTERNATIONAL REMITTANCES AND HOUSEHOLD WELFARE IN VIETNAM FROM VHLSS 2006 AND VHLSS 2008 “This paper was submitted in partial fulfillment of the requirements for the Masters of Development Economics (MDE) degree at the Vietnam - The Netherlands Programme (VNP), August/2012” BY NGUYEN VAN PHUC Ho Chi Minh City, August 2012 ABSTRACT International remittances has more important role in progress of economy and society in Vietnam With US$ billions in 2011, Vietnam is one of 10 top countries received the remittances in the world This paper examines the impact of international remittances, which increases over time, on the household welfare of receiving households in Vietnam The thesis has combined the propensity score matching and difference-in-differences methods with panel data taken from Vietnam Household Living Standard Surveys 2006 and 2008 It is found that international remittances increases income and expenditures for recipients, but the effect of remittances on expenses of healthcare and education is not statistically significant although the expenses also rise over time When studying separately for urban and rural areas, the thesis found that the impact of international remittance on income and expenditures are positive and statistically significant for rural areas and positive and insignificant for urban areas; meanwhile, the paper has not detected the affects of foreign remittances on education and healthcare in urban or rural areas Key words: international remittances, household welfare, household surveys, Vietnam TABLE OF CONTENTS ABSTRACT i TABLE OF CONTENTS ii CHAPTER 1: INTRODUCTION 04 1.1 Problem statement 1.2 Research objectives 1.3 Research question 1.4 Thesis structure ………………………………………………………………… CHAPTER 2: LITERATURE REVIEW 08 2.1 The key concepts 2.2 Empirical literature 2.3 Empirical framework 2.4 Overview of theory on impact evaluation 2.5 Summary of PSM and DD methods 2.5.1 Propensity Score Matching (PSM) 2.5.2 Difference-in-difference (DD) CHAPTER 3: METHODOLOGY AND DATA 22 3.1 The research model 3.2 Variable introduction 3.3 Data … 3.4 Estimation Strategy 0.445] -0.204 [0.691] -0.316 [0.493] -0.035 0.046 0.064 [0.102] [0.084] [0.421] 0.432*** 0.465*** 0.353*** 0.357*** 0.190 Reg_7 [0.119] [0.102] [0.093] [0.077] [0.452] 0.230*** 0.311*** 0.220*** 0.228*** -0.781* Reg_8 [0.085] [0.069] [0.074] [0.054] [0.436] 9.674*** 9.233*** 9.599*** 9.468*** -0.862 Constant [0.274] [0.105] [0.223] [0.188] [1.038] 498 498 498 498 498 Observations 0.276 0.263 0.310 0.304 0.488 R-squared Note: (1) Full model, (2) Restricted model Robust standard errors in parentheses -0.226 [0.833] 0.155 [0.205] -0.480 [1.040] 0.994*** [0.266] 1.080*** [0.309] -0.083*** [0.031] 5.319*** [0.601] -1.534*** [0.499] -1.592** [0.723] 1.798*** [0.490] 5.097*** [0.639] -0.842* [0.446] 0.000** [0.000] -0.920*** [0.306] Reg_6 -0.728** [0.284] -1.264 [0.818] 498 0.485 Ln_healthcare (1) (2) 0.49 [0.489] 0.259* [0.133] -0.208 [0.574] 0.159 [0.251] 0.082 [0.201] -0.007 [0.019] -0.002 [0.007] 0.050 [0.141] -0.623 [0.447] 1.685*** [0.356] 0.062 [0.472] 0.264 [0.338] -0.011 [0.348] 0.213 [0.351] -0.000 [0.000] 0.000 [0.000] 0.000*** [0.000] -0.000** [0.000] -0.661*** [0.253] -0.393 [0.297] -0.749 [0.540] -0.126 [0.341] -0.092 [0.276] -0.269 [0.315] -0.007 [0.262] 4.725*** [0.689] 498 0.146 0.572 [0.497] 0.276** [0.132] -0.244 [0.570] 1.702*** [0.234] 0.000*** [0.000] -0.000* [0.000] -0.450*** [0.150] 4.778*** [0.111] 498 0.122 *** significant at 1% level; ** significant at 5% level; * significant at 10% level) Source: Author's estimation from panel data of VHLSS 2006-2008 74 Appendix 5.4B Results of DD Regression with PSM for Rural only Variables Ln_income (1) (2) 0.360* [0.188] 0.103 [0.064] -0.097 [0.273] 0.189* [0.101] 1.402*** [0.101] -0.110*** [0.011] -0.009*** [0.003] -0.163* [0.089] 5.107*** [0.205] 0.005 0.034 -0.442*** [0.044] [0.036] [0.161] 0.381*** 0.379*** 0.359*** 0.331*** 0.041 Reg_7 [0.042] [0.039] [0 33] [0.029] [0.160] 0.268*** 0.269*** 0.212*** 0.185*** -0.249** Reg_8 [0.030] [0.027] [0.023] [0.019] [0.126] 9.070*** 9.060*** 8.838*** 8.812*** -0.863*** Constant [0.080] [0.056] [0.068] [0.049] [0.331] Observations 4,964 4,964 4,964 4,964 4,964 R-squared 0.338 0.338 0.383 0.382 0.435 Note: (1) Full model, (2) Restricted model Robust standard errors in parentheses -0.469*** [0.143] Year Interact=inremit*year Loremit Hhsize Hhsize2 Headage Gender Child16 Elder Technic Secondary Highschool College Pcannuland Pcpereland Pcforexland Pcwatersuface Reg_1 Reg_2 Reg_3 Reg_4 0.239*** [0.054] 0.119*** [0.016] 0.201** [0.078] -0.049*** [0.006] -0.003*** [0.001] -0.312*** [0.052] 0.728*** [0.063] 0.187*** [0.040] 0.507*** [0.056] -0.219*** [0.040] 0.000*** [5.43e-06] 0.000*** [7.89e-06] 0.000*** [0.000] 0.058** [0.027] -0.107*** [0.028] -0.389*** [0.068] -0.262*** [0.030] 0.107*** [0.042] 0.242*** [0.013] 0.114* [0.064] 0.065*** [0.020] -0.089*** [0.020] 0.003* [0.002] -0.001** [0.001] 0.017 [0.018] -0.332*** [0.044] -0.020 [0.041] 0.415*** [0.052] 0.109*** [0.033] 0.494*** [0.044] -0.229*** [0.033] 0.000*** [4.26e-06] 0.000*** [6.61e-06] -5.44e-07 [1.97e-06] 0.000*** [0.000] 0.035 [0.023] -0.065*** [0.025] -0.192*** [0.060] -0.200*** [0.026] 0.105** [0.042] 0.242*** [0.013] 0.115* [0.064] 0.066*** [0.020] -0.057*** [0.005] Ln_education (1) (2) 0.358* [0.189] 0.107* [0.064] -0.100 [0.273] 0.191* [0.102] 1.373*** [0.105] -0.108*** [0.011] -0.007** [0.003] -0.145 [0.090] 5.064*** [0.207] -0.202 [0.170] -1.649*** [0.324] 1.281*** [0.149] 3.969*** [0.238] -1.260*** [0.127] -0.000 [0.000] 0.000** [0.000] -0.000 [0.000] -0.000 [0.000] -0.199* [0.120] -0.662*** [0.127] -0.778** [0.340] -0.395*** [0.130] Inremit 0.239*** [0.054] 0.118*** [0.016] 0.199** [0.078] -0.008 [0.026] -0.069*** [0.023] 0.002 [0.002] -0.003*** [0.001] 0.026 [0.022] -0.309*** [0.054] -0.057 [0.050] 0.727*** [0.063] 0.181*** [0.041] 0.506*** [0.056] -0.209*** [0.041] 0.000*** [5.45e-06] 0.000*** [8.21e-06] 1.57e-07 [2.93e-06] 0.000*** [0.000] 0.059** [0.028] -0.390*** [0.030] -0.390*** [0.068] -0.261*** [0.032] Ln_texpen (1) (2) -0.002*** [0.001] -0.345*** [0.043] 0.420*** [0.052] 0.115*** [0.032] 0.491*** [0.043] -0.228*** [0.032] 0.000*** [4.20e-06] 0.000*** [6.18e-06] 0.000*** [0.000] -0.093*** [0.019] -0.224*** [0.057] -0.227*** [0.020] -1.645*** [0.323] 1.315*** [0.147] 3.997*** [0.237] -1.290*** [0.125] 0.000** [0.000] -0.219** [0.104] -0.711*** [0.110] -0.903*** [0.338] -0.420*** [0.116] Ln_healthcare (1) (2) 0.081 [0.135] 0.285*** [0.048] 0.243 [0.191] 0.175** [0.076] -0.068 [0.064] 0.003 [0.006] 0.001 [0.003] -0.135** [0.062] -0.322** [0.155] 0.903*** [0.142] 0.182 [0.199] 0.144 [0.120] 0.091 [0.169] -0.321*** [0.121] -2.29e-06 [0.000] 0.000** [0.000] -0.000 [7.80e-06] 0.000 [0.000] 0.198** [0.092] -0.377*** [0.098] -0.404* [0.215] -0.188* [0.107] 0.090 [0.135] 0.288*** [0.048] 0.250 [0.191] 0.193** [0.076] -0.034* [0.018] -0.153** [0.060] -0.429*** [0.133] 0.924*** [0.115] -0.387*** [0.100] 0.000** [0.000] 0.353*** [0.067] -0.250*** [0.078] Reg_5 Reg_6 -0.286*** [0.105] -0.876*** [0.323] 4,964 0.435 0.207 [0.126] 0.505*** [0.121] 0.442*** [0.095] 4.662*** [0.237] 4,964 0.095 0.334*** [0.112] 0.626*** [0.106] 0.566*** [0.074] 4.606*** [0.121] 4,964 0.093 *** significant at 1% level; ** significant at 5% level; * significant at 10% level) Source: Author's estimation from panel data of VHLSS 2006-2008 75 ... and difference -in- differences methods with panel data taken from Vietnam Household Living Standard Surveys 2006 and 2008 It is found that international remittances increases income and expenditures... examines the impact of international remittances, which increases over time, on the household welfare of receiving households in Vietnam The thesis has combined the propensity score matching and. ..ABSTRACT International remittances has more important role in progress of economy and society in Vietnam With US$ billions in 2011, Vietnam is one of 10 top countries received the remittances in the