Poverty Reduction in Vietnam

1
Poverty Reduction in Vietnam

• Do tariff cuts hurt the poor?

2
Should poor countries cut tariffs?

• The public and political perception of an
  elimination of tariffs lead us to expect negative
  effects after a tariff elimination
• Poor countries reluctant to cut the tariffs,
  particularly in agriculture
• Are tariff cuts in developing countries helping
  in alleviating poverty?

3
Effects of a tariff elimination in Vietnam on the
Other Foods and Beverages sector

• Most protected sector in Vietnam (8 to 66)
• This sector includes vegetable oils and fats,
  sugar, beverages and tobacco, other food products
• Largest share of imports among agricultural
  goods,
• but 5 of overall imports and 3 of total
  value of output
• Unskilled labor intensive
• Scenario remove tariffs in Other Foods and
  Beverages sector
• Does this trade liberalization help the poor?

4
Regional poverty decomposition
5
Macroeconomic impacts

• 71 increase in imports of Other Food and
  Beverages
• ToT -1
• Average utility per capita increases 0.132

Poverty distribution by strata
6
Drivers of poverty change in Vietnam
Drivers of poverty Drivers of poverty
Land 1.82
Ag-Unskilled 1.42
Ag-Skilled 1.36
Nag-Unskilled 1.4
Nag-Skilled 1.29
Wage-Unskilled 1.41
Wage-Skilled 1.29
Ag-Capital 1.11
Nag-Capital 1.3
Transfers 0
Taxes 1.07
Cost of Living -0.59
7
Earnings shares in Vietnam
Earnings Agric Nonagric Urblab Rurlab Transf Urbdiv Rurdiv
Land 0.03 0 0 0 0 0.04 0.01
Ag-Unskilled 0.96 0 0 0 0 0.43 0.09
Ag-Skilled 0 0 0 0 0 0 0
Nag-Unskilled 0 0.58 0 0.01 0 0.11 0.14
Nag-Skilled 0 0.01 0 0 0 0 0
Wage-Unskilled 0 0 0.99 0.79 0 0.02 0
Wage-Skilled 0 0 0 0.18 0 0 0
Ag-Capital 0.01 0 0 0 0 0.02 0
Nag-Capital 0 0.4 0.01 0.02 0 0.24 0.55
Transfers 0 0.01 0 0.01 1 0.14 0.21
8
Changes in poverty
Strata Earnings Tax Cost of Living Total
Agric 0.000 0 0 0.000
Nonagric -0.003 0.002 -0.001 -0.002
Urblab 0.000 0 0 0.000
Rurlab 0.000 0 0 0.000
Transf 0.000 0 0 0.000
Urbdiv -0.002 0.001 -0.001 -0.002
Rurdiv -0.011 0.009 -0.006 -0.008
Total -0.016 0.013 -0.009 -0.012
9
Conclusions

• Nonagric, Urbdiv and Rurdiv the only strata that
  changes in poverty occur
• Total change in poverty 12,000 people coming out
  of poverty
• Contrary to expectations unskilled labor real
  earnings rise due to export expansion in the
  Textile and Apparel (P) and Manufactures
• Trade liberalization of the Other Food and
  beverage sector does help the poor in Vietnam.