Welfare in Vietnam During the 1990s: Poverty, Inequality and Poverty Dynamics

During the 1990s, Vietnam’s economy was transformed through a series of economic, social and political reforms, resulting in an average growth rate over the decade in excess of 6% per annum. This strong growth performance was accompanied by a dramatic fall in the incidence of consumption per capita poverty. This paper examines the changes in poverty and poverty dynamics over the 1990s using a nationally representative panel of households surveyed in 1992-93 and 1997-98. We analyse how robust the reduction in poverty is to the methods used to measure poverty. We find that regardless of where the poverty line is drawn, consumption poverty fell between 1992-93 and 1997-98, but that the extent of this fall is sensitive to the choice of poverty line. We also examine changes in the distribution of living standards over time, finding that the fall in poverty was accompanied by a rise in inequality, with some subgroups of the population failing to share equally in the strong growth of the country. Finally, we examine rural poverty dynamics, presenting transition matrices of movements in and out of poverty over time and estimating a model of consumption change. We find that regional differences are important, as are access to key institutions and infrastructure, and education. We also find that shifts in employment and production patterns, especially of rice, which we argue to be induced by the economic reform process, are strongly related to changes in living standards over time.