Economic growth poverty and household welfare in vietnam book.pdf

This preview shows page 1 out of 647 pages.

Unformatted text preview: WORLD BANK REGIONAL AND SECTORAL 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 Reconstruction and Development/THE WORLD BANK 1818 H Street, NW Washington, DC 20433 Telephone: 202-473-1000 Internet: E-mail: [email protected] All rights reserved. 1 2 3 4 07 06 05 04 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 978-7504470, . 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 [email protected] 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 vii Foreword 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 Paul Glewwe 1 Part I. Vietnam’s Economic Performance in the 1990s 27 2. Reform, Growth, and Poverty David Dollar 29 3. The Wage Labor Market and Inequality in Vietnam John Luke Gallup 53 4. Household Enterprises in Vietnam: Survival, Growth, and Living Standards Wim P. M. Vijverberg and Jonathan Haughton 95 Agriculture and Income Distribution in Rural Vietnam under Economic Reforms: A Tale of Two Regions Dwayne Benjamin and Loren Brandt 133 5. v vi Contents Part II. Poverty Reduction in Vietnam in the 1990s 6. The Static and Dynamic Incidence of Vietnam’s Public Safety Net Dominique van de Walle 187 189 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 Bob Baulch, Truong Thi Kim Chuyen, Dominique Haughton, and Jonathan Haughton Part III. Progress in Health and Education in Vietnam in the 1990s 9. Poverty and Survival Prospects of Vietnamese Children under Doi Moi Adam Wagstaff and Nga Nguyet Nguyen 10. Child Nutrition, Economic Growth, and the Provision of Health Care Services in Vietnam Paul Glewwe, Stefanie Koch, and Bui Linh Nguyen 273 311 313 351 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 Nga Nguyet Nguyen 425 13. An Investigation of the Determinants of School Progress and Academic Achievement in Vietnam Paul Glewwe 467 Part IV. Other Topics 503 14. Child Labor in Transition in Vietnam Eric Edmonds and Carrie Turk 505 15. Economic Mobility in Vietnam Paul Glewwe and Phong Nguyen 551 16. Private Interhousehold Transfers in Vietnam Donald Cox 567 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 interhousehold 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 Acknowledgments Many people in addition to the authors contributed to this book, and we appreciate their assistance. Funding for the two Vietnam Living Standards Surveys was provided by the United Nations Development Programme and the Swedish International Development Agency. The Social and Environmental Statistics Department of Vietnam’s General Statistical Office implemented both surveys with a very high degree of enthusiasm and pro­ fessionalism. Indeed, several of the authors of these chapters are from that department. Sarah Bales served as an outstanding consultant in the imple­ mentation of the second survey. Financial support to undertake much of the research was obtained from the World Bank’s Research Committee. The British Department for International Development funded a workshop to disseminate first drafts of the papers, which was held in Hanoi in May 2001, and also funded several of the papers. Very able editing and manuscript processing were provided by Alison Peña, Emily Khine, and Lucie AlbertDrucker. The World Bank’s Office of the Publisher managed editorial and print production, including book design. Numerous other people con­ tributed in many ways, but if we attempt to name them all, we are likely to omit several of them. Finally, we would like to thank all the households that participated in both surveys; by providing a large amount of information, they have helped us understand what has occurred in Vietnam in the 1990s. Hopefully, our research will lead to better policies that will improve their lives in the years to come. ix Contributors Bob Baulch Fellow, Institute of Development Studies, University of Sussex, Brighton, United Kingdom Dwayne Benjamin Department of Economics, University of Toronto, Ontario, Canada Loren Brandt Department of Economics, University of Toronto, Ontario, Canada Truong Thi Kim Chuyen Department of Geography, National University of Ho Chi Minh City, Vietnam Donald Cox Department of Economics, Boston College, Chestnut Hill, Mass. David Dollar Development Research Group, World Bank, Washington, D.C. Eric Edmonds Department of Economics, Dartmouth College, Hanover, N.H. John Luke Gallup Consultant to the World Bank Paul Glewwe Department of Applied Economics, University of Minnesota, St. Paul; and senior economist for the World Bank xi xii Contributors Dominique Haughton Department of Mathematical Sciences, Bentley College, Waltham, Mass. Jonathan Haughton Department of Economics, Suffolk University, Boston, Mass. Stefanie Koch Consultant to the World Bank Nicholas Minot Research Fellow, International Food Policy Research Institute, Washington, D.C. Bui Linh Nguyen General Statistical Office, Hanoi, Vietnam Nga Nguyet Nguyen Poverty Reduction and Economic Management, World Bank, Vietnam Country Office, Hanoi Phong Nguyen General Statistical Office, Hanoi, Vietnam Pravin K. Trivedi Department of Economics, Indiana University, Bloomington Carrie Turk Poverty Reduction and Economic Management, World Bank, Vietnam Country Office, Hanoi Dominique van de Walle Development Research Group, World Bank, Washington, D.C. Wim P. M. Vijverberg School of Social Sciences, University of Texas at Dallas Adam Wagstaff Health, Nutrition, and Population Team, World Bank, Washington, D.C. Abbreviations and Acronyms 2SLS 2SLSFE ANOVA ASEAN BMI CEMMA CHC CPI CPRGS CSI D DHS FDI FEs GDP GER GNI GNP GSO HEPR ICDS ICRG ILO IMR IUD IV MARS MCI Two-stage least squares Two-stage least squares with fixed effects Analysis of variance Association of Southeast Asian Nations Body mass index Committee for Ethnic Minorities in Mountainous Areas Commune health center Consumer price index Comprehensive Poverty Reduction and Growth Strategy Comprehensive Student Insurance Vietnamese dong (currency) Demographic and Health Survey Foreign direct investment Fixed effects Gross domestic product Gross enrollment rate Gross national income Gross national product General Statistical Office Hunger Eradication and Poverty Reduction Inter-Censual Demographic Survey International Country Risk Guide International Labour Organisation Infant mortality rate Intrauterine device Instrumental variable Multiple adaptive regression spline Multiple cropping index xiii xiv MDGs MICS MOLISA NERs NFHEs NGO NPK OECD OLS PCSI PHF plim PROM PROT PRSP PTA ROC SCF U.K. SIDA SMEs SOEs TDY U5MR UNDP UNESCO VHI VHSR VLSSs WHO WTO Abbreviations and Acronyms Millennium Development Goals Multiple Indicator Cluster Survey Ministry of Labor, Invalids and Social Affairs Net enrollment rates Nonfarm household enterprises Nongovernmental organization Nitrogen-potassium-phosphate compound fertilizer Organisation for Economic Co-operation and Development Ordinary least squares Propensity to consume out of social income Private health facility Probability limit Test of policy’s Promotion of the poor Test of policy’s Protection of the poor Poverty Reduction Strategy Paper Parent-teacher association Receiver operating characteristics Save the Children Fund, United Kingdom Swedish International Development Authority Small and medium enterprises State-owned enterprises Thousands of dong per year Under-five mortality rate United Nations Development Programme United Nations Educational, Scientific, and Cultural Organization 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 any hope of raising their level of welfare. Its gross domes­ tic product (GDP) per capita in 1985 is estimated to have been US$130 per year, making it one of the world’s five poorest countries. Although school enrollment rates were relatively high for such a poor country, they remained stagnant while school enrollment rates were increasing dramati­ cally in nearby East Asian “miracle” countries. At the same time, while life expectancy was unusually high for such a poor country, exceptionally low incomes meant that the majority of Vietnamese children were malnour­ ished. As a very poor country with scant prospects for a better future, Vietnam was in the same category as many of the poorest countries in Africa, Asia, and Latin America. Starting in the late 1980s and continuing through the 1990s, Vietnam transformed itself from an economic “basket case” into one of the most suc­ cessful countries in the world in terms of economic growth, poverty reduc­ tion, and increased household welfare. This transformation raises significant questions for anyone concerned with poverty in the poorest developing countries: What accounts for Vietnam’s astonishing success? What can Vietnam do to ensure continued success? Finally, can other very poor coun­ tries achieve this same success by following Vietnam’s policies? This book seeks to answer these questions. It will do so by analyzing Vietnam’s success in detail, using a variety of data from Vietnam and else­ where. Vietnam is fortunate, not only because of its economic and social success but also because of the existence of an unusually large amount of high-quality data. The analyses in the chapters that follow make full use of 1 2 Economic Growth, Poverty, and Household Welfare in Vietnam these data and thus provide a wealth of information that can be used by researchers and policymakers in Vietnam and in other developing countries. This chapter sets the stage for the book. The first section describes the new economic policies that Vietnam has adopted since the late 1980s. The next section provides an overview of Vietnam’s achievements in the 1990s. The following section summarizes the results from the various chapters, and a final section summarizes the conclusions and raises issues for future research. An appendix at the end of the chapter provides information on the 1992–93 and 1997–98 Vietnam Living Standards Surveys (VLSSs), the data that are used most frequently in the book.1 Doi Moi Policy Reforms In the 1980s, Vietnam was an extremely poor country, with a low rate of eco­ nomic growth. Inflation rose dramatically as government deficits were fi­ nanced by printing money; by 1986, the annual inflation rate had risen to 487 percent. Vietnam’s response to this poor economic performance was the adoption of the Doi Moi (“renovation”) policy reforms in the late 1980s.2 This process began with the Sixth Congress of the Communist Party, held in December 1986. At this meeting, the government explicitly adopted the goal of replacing central planning with a regulated market economy. A series of fundamental policy changes was quickly implemented in the following years, so that by 1989 most forms of private economic activity were legal and price controls had been removed for almost all goods and services. This section describes these policy changes, as well as several that were imple­ mented in the 1990s, in more detail. The first important policy changes were implemented in the agricultural sector. In 1987 and 1988, price controls were gradually removed for agricul­ tural goods, and farm households were allowed to sell any surplus products at whatever price the private market would bear. Another decisive change occurred when Decree Number 10 was issued in April 1988. That decree dis­ mantled agricultural cooperatives and divided up almost all agricultural land among the rural households that had worked for those cooperatives. Those households were provided with leases that lasted for 15 or more years for the plots of land they received. Households were required to pay taxes for the right to use the land, but after taxes all output was the property of the households. These changes in agricultural policy, along with the lifting of many re­ strictions on overseas exports in the late 1980s, helped Vietnam to become the world’s third largest rice exporter by 1992, a dramatic change from its status as a rice importer in the mid-1980s. Yet land rights were still limited at the beginning of the 1990s; agricultural land could not be transferred to an­ other household, nor could it be transferred in the form of an inheritance. In the 1990s, the government increased property rights for 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 mortgage their land and to transfer land use rights, including transfer by inheritance. Another important policy change was Decree Number 140 of 1997, which relaxed restrictions on the internal trade of agricultural commodities. Most of the remaining export restrictions were removed in the 1990s. Sweeping policy changes were also made in other sectors of Vietnam’s economy. To ensure macroeconomic stability, and in particular to reduce the rate of inflation, the central government reduced spending and modified the tax system to raise more revenue. This reduced the central government budget deficit from 8.4 percent of GDP in 1989 to 1.7 percent in 1992, one consequence of which was that the rate of inflation plummeted, as will be seen in the next section. Much of this spending reduction took the form of closing or selling un­ profitable state-owned enterprises (SOEs), and reducing the number of em­ ployees at many of those that remained. Between 1989 and 1992, the number of SOEs was cut in half, from 12,000 to 6,000, and about 800,000 employees of SOEs (about one-third of the initial number) were laid off. The rapid growth of private sector employment opportunities, and the s...
View Full Document

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture