The Recent Economic Performance and Poverty Reduction in Vietnam

This study aims to determine the factors of sector gains and labor shifts on poverty of Vietnam, and examine how far the effects of these two factors on poverty reduction have changed over time. The empirical analysis utilizes data from the Vietnam Household Living Standards Survey in 1998 and 2002. As a result, agricultural sector has been central to the strong poverty reduction experienced by Vietnam over the last decade. Around 60% of the aggregate decline in poverty indicators originated from improvement in income of farmers. Lower poverty incidence of all the remaining sectors jointly accounted for around 30% and 20% of the national fall in poverty indices in 1993-1998 and 1998-2002 respectively. In contrast, as a result of quicker movements from low productivity sectors to higher productivity ones, labor shifts evolved as a more important contributing factor to poverty reduction in the same period. The highest concentration and severity of the two farmer groups, and their impressive participation in the reduction of aggregate poverty as pointed out in this study convey a strong message to policy makers, which implies that policies to reduce poverty in Vietnam must continue to reach farmers if a considerably further reduction in poverty is to be achieved