Trade liberalisation, poverty, and inequality in Vietnam: a quantile regression approach

ABSTRACT

This study examines the effects of trade liberalisation on rural household welfare, poverty, and inequality in Vietnam, with the use of multiple estimation strategies, including the panel quantile regression approach based on Canay's two-step estimator. Taking account of the multi-faceted nature of trade liberalisation, we consider a set of household-level trade-related variables, including employment in export, import-competing, and manufacturing sectors. A unique panel data set is constructed from the Vietnam Household Living Standards Surveys conducted in 2002, 2004 and 2006. We find that employment in trade-related sectors contributes significantly to rural household welfare. Moreover, the effects of trade-related employment on welfare are heterogeneous across the welfare/income distribution, in that trade-related employment sectors have different influences on different groups/quantiles of households.

KEYWORDS:

• Trade liberalisation
• poverty
• inequality
• quantile regression
• rural households
• Vietnam

JEL CLASSIFICATION:

• C23
• F16
• I32
• O12
• O24
• P36

Acknowledgments

We are grateful to Duc-Tho Nguyen, Griffith University, Brisbane, Australia (now retiring) for his invaluable comments and incisive suggestions, which improved this paper considerably. We would like to thank the Editor Mark Taylor for important advice and the anonymous Referee of the journal of Applied Economics for the essential comments and suggestions.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ To reduce by half the proportion of people with less than $1.25 a day between 1990 and 2015.

² See the UNDP (2005) for more discussions about the approaches to measuring poverty.

³ The export sectors and import-competing sectors are suggested by Niimi, Vasudeva-Dutta, and Winters (2007).