The role of rice in poverty dynamics in rural Vietnam: 2002–2008

Abstract

Using the Vietnamese Household Living Standards Surveys of 2002, 2004, 2006, and 2008, this paper investigates the role of rice in poverty dynamics in the recent context of Vietnam. We find that sizeable changes in rice prices in the 2000s, which were driven largely by the country's integration into the world markets, have not helped rural households escape poverty, even for households with large-scale rice production. Our results also document that changes in rice output and productivity did not help mitigate poverty either. The paper provides evidence to explain why a substantial exogenous increase in the rice prices between 2006 and 2008 did not help rural households to move out of poverty, while similar changes did help in the 1990s.

Keywords:

• poverty dynamics
• rice price
• Vietnam

JEL classifications:

• O12
• O15

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. According to FAO (2014), Thailand is the largest rice exporter in the world, followed by Vietnam and India. Specifically, in 2008, rice exports of Thailand, Vietnam, and India were 10,186,678 tonnes, 4,735,170 tonnes, and 2,484,249 tonnes, respectively.

2. Many commodities experienced substantially increased prices over this period. For example, milk powder by 90%, wheat by 70%, and rice by about 25% (Ivanic and Martin, 2008). Such large increases in agricultural prices are likely to have large impacts on the welfare of the poor agricultural households in developing countries.

3. For more details, see, for example, ‘The World Food Crisis’ in The New York Times of 2008 (http://www.nytimes.com/2008/04/10/opinion/10thu1.html?_r=0).

4. The real rice price at farm gate, as recorded in household surveys is, 1.89 in 2002, 1.96 in 2004, 2.09 in 2006, and 2.68 in 2008 (with the unit being thousand VND/kg).

5. Perry and Olarreaga (2006) suggest that complementary steps, related to education, access to credit, insurance, flexible entry and exit of firms, flexible labour markets, social security, access to infrastructure and technical assistance, can help the poor to maximize the new economic opportunities offered by trade reforms.

6. Goldberg and Pavcnik (2007) argue that the empirical evidence is inconsistent with the Stolper–Samuelson theorem in developing countries, and that there has been an increase in the share of skilled labour within most industries over the last two decades.

7. Meanwhile, the 2002–2004 VHLSS panel has been found to include incorrect household matches, about 10%. See for example, McCaig (2009). We would like to thank Brian McCaig for providing us with the code to correct these matches.

8. Specifically, urban poverty has been close to zero over the period 2002–2008, with the urban poverty rate being 5.88%, 4%, 3.47%, and 3.44% in 2002, 2004, 2006, and 2008, respectively.

9. We use the real expenditure estimates given in the data-sets. Otherwise, there is extremely small amount of regional price variation in the 2002 and 2004 VHLSSs relative to the 2006 VHLSS. This has been pointed out by Benjamin, Brandt, and McCaig (2009).

10. Poor–non-poor refers to a status of poor in the first year of the panel data-set and a status of non-poor in the second year. Non-poor–poor relates to a status of non-poor in the first year and a status of poor in the second year.

11. RRR is the ratio of the probability of a given outcome to the probability of the base outcome. An RRR coefficient that is less than 1 implies that the concerned variable reduces the relative probability of being in a given outcome and increases the probability of being in the base outcome. Coefficients greater than one imply that the variables increase the probability of being in a given outcome. The percentage change in probability is determined by the coefficient minus 1, multiplied by 100. This rule is the same for both continuous and dummy explanatory variables.

12. In order to check for this, we run probit models for transitions from poor to non-poor (p-values are cumbersome to calculate in multinomial logit models, but are more straightforward in probit models).

13. Data on the export price of rice were obtained from the Ministry of Agriculture and Rural Development for the period 2002 to 2006, and from GSO for 2007 and 2008.

14. Using general equilibrium model to simulate the effects of price changes, Coxhead, Linh and Tam (2012) also find that the poor in Vietnam did not benefit from an increase rice prices in 2007–2008.

15. Since the non-rice food price increase was less than that of the rice price (i.e., a 20% increase vs. a 52% increase), the substitution effect is likely to be effective. However, there is no reason to believe that there was a major change in the consumption habits of the population between the 1990s and late 2000s. It is important to point out that even if an increase in rice price results in an increase in income, and consequently, a statistically significant increase in the expenditure of poor rice producers, there may still be no movement of poor households out of poverty at all. Justino et al. (2008, p. 173) also recognize this limitation of using expenditure consumption data to make inferences about poverty transitions.

16. This is the average rice output of the second quintile of the rice producers. The results remain unchanged when we consider the average rice output of the third quintile as the threshold.

17. Meanwhile Figure 4(a) and 4(b) indicate none of the interaction terms are statistically significant in both panel data-sets 2002–2004 and 2004–2006.

18. The value of imported goods into Vietnam from China increased from 329.7 million US dollars in 1995 to 515 million US dollars in 1998. However, this value has increased dramatically since 2000, from 1401 million US dollars in 2000 to 15,973.6 million US dollars in 2008. The value of exported goods from Vietnam to China also increased significantly in the 2000s compared with the 1990s, from 361.9 million US dollars in 1995 to 440 million US dollars in 1998, with a further rapid increase from 1536.4 million US dollars in 2000 to 4850.1 million US dollars in 2008 (Vietnam GSO).

Additional information

Notes on contributors

Trung X. Hoang

Trung X. Hoang is affiliated with Vietnam Academy of Social Sciences, Hanoi, Vietnam. His research interests include economic development, international trade policy, and health economics. He has recently published in World Development.

Cong S. Pham

Cong S. Pham is a Lecturer in Economics in the Department of Economics, Deakin Business School, Deakin University. His research interests include International Trade, Economic Development, Applied Econometrics and Asian Economies such as China, India, and Vietnam. He has recently published in the World Development and the International Review of Economics and Finance.

Mehmet A. Ulubaşoğlu

Mehmet A. Ulubaşoğlu is with the Department of Economics at Deakin University, Melbourne, Australia. His research interests include Economic Development, Political Economy, and International Trade Policy. He has recently published in the European Economic Review, World Development, European Journal of Political Economy, Australian Journal of Agricultural and Resource Economics..