Multidimensional urban poverty estimates in vietnamese central cities

INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM VIETNAM- NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS MULTIDIMENSIONAL URBAN POVERTY ESTIMATES IN VIETNAMESE CENTRAL CITIES BY NGUYEN VAN CUONG MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, JANUARY 2012 INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM VIETNAM- NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS MULTIDIMENSIONAL URBAN POVERTY ESTIMATES IN VIETNAMESE CENTRAL CITIES A thesis submitted to partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By NGUYEN VAN CUONG Academic Supervisor: Dr NGUYEN HUU DUNG HO CHI MINH CITY, JANUARY 2012 ACKNOWLEDGEMENT The thesis has benefited from inputs and comments of many people who the author wishes to thank for their valuable contribution in various stages of the research Dr Nguyen Huu Dung (University of Economics Ho Chi Minh City - VietNam), who has been giving instructions and fruitful suggestions all the time of research for and writing of this thesis Mr Nguyen Chau Thoai (Ho Chi Minh University of Natural Resource and Environment - Viet Nam) who supported the author extracting the data from VHLSS 2008 Author would like to give the profound gratitude to his family and others giving great encouragement for study In the end, author would like to express the warmest thanks to all beloved Professors in the Vietnam - The Netherlands Programme for Master Degree in Development Economic program who transferred the valuable knowledge during the course of study in MDE class 16 ABSTRACT The thesis estimates multidimensional poverty in five urban central cities in Viet Nam, namely HaNoi, HaiPhong, Da Nang, Ho Chi Minh, and Can Tho by applying a new approach developed by Alkire and Santos, using Vietnam Living Standard Survey in 2008 There are five dimensions considered for estimation in urban central city including education, health, standard of living, economic well-being, and employment labor Findings shows that multidimensional poverty is significant high in central cites, especially in Ho Chi Minh City and that those multidimensional poor suffer from the high deprivation intensity of indicators as type of dwelling, underemployment, housing space, and working time However, five urban central cities present non-depreciable level of deprivation in electricity When weights derived from the author's estimation, underemployment deprivation significantly increases its contribution as it receives a higher weight The thesis suggested an alternative approach for national poverty measurement at multidimensional level as well as a tool for budget allocation 11 TABLE OF CONTENTS CHAPTER 1: INTRODUCTION 1.1 Problem statement 1.2 Research objectives 02 1.3 Research question 03 1.4 Research hypotheses 03 1.5 Methodology 03 1.6 Research scope 03 CHAPTER II: LITERATURE REVIEW 2.1 Introduction 04 2.2 Basic concepts and definitions 04 2.3 Comparison between absolute and relative measurement 11 2.4 Theoretical framework related to MPI 12 2.5 Empirical studies related to dimensions and indicators of poverty 14 CHAPTER III: DATA AND METHODOLOGY Measurement of poverty 21 1.1 Absolute measurement 21 3.1.2 Relative measurement by MPI 22 3.2 Study sites 27 3.3 Data requirements 27 CHAPTER IV: MULTIDIMENSIONAL POVERTY IN CENTRAL CITY 4.1 Overview of five central cities 34 4.2 Review of poverty in five urban central cities 34 4.2.1 The poverty head count ratio in money-metric measure 34 111 4.2.2 The poverty ratio by Head count H in MPI measure 34 4.2.3 Poverty comparison between money-metric and MPI 35 4.3 Comparison urban poverty ratio in central cities by MPI measure 38 4.4 Poverty comparison by indicators 41 CHAPTER V: CONCLUSIONS AND POLICY IMPLICATIONS 5.1 Summary 61 5.2 Conclusions 62 5.3 Policy implications 62 REFERENCES 66 APPENDICES 72 IV LIST OF CHARTS Chart 4.1: Poverty ratio by money-metric and MPI measure 35 Chart 4.2: Percentage of deprivation by indicator in urban central city 36 Chart 4.3: General poverty rate by urban and rural region 37 Chart 4.4: Poverty rate in central city in 2006 and 2008 38 Chart 4.5: Comparison poverty rate between Head count H and Analytical result of GSO from VHLSS 2008 40 Chart 4.6: Percentage of deprivation by indicator in each central city 41 Chart 4.7: Comparison GSO and author's result by type of dwellings 44 Chart 4.8: Percentage of chronic sickness by city 47 Chart 4.9: Percentage of working time by city 48 Chart 4.10: Percentage of adult illiteracy by city 49 Chart 4.11: Percentage of underemployment by city 50 Chart 4.12: Percentage of drinking and cooking water by city 51 Chart 4.13: Percentage of assets by city 52 Chart 4.14: Percentage of home ownership by city 53 Chart 4.15: Percentage of years of schooling by city 54 Chart 4.16: Percentage of under-schooling 6- 15 by city 55 Chart 4.17: Percentage ofhospital payment by city 56 Chart 4.18: Percentage of average expenditure by city 57 v LIST OF TABLES AND FIGURES Table 2.1: General poverty line by Ministry of Labors, Invalids and Social Affair 10 Table 2.2: Specific poverty line in five central cities 10 Table 3.1: Dimensions, indicators, cutoffs and weights of the MPI 25 Table 3.2: Number of surveyed households in five central cities 28 Table 3.3: Indicators, definition, and file to extract indicators 30 Table 4.1: The Head count H, average intensity ofMPI poverty 39 Table 4.2: Percentage of households having type of house 42 Table 4.3: Percentage of households having type of house 43 Table 4.4: Housing space per capita by type of house, city, and region 45 Table 4.5: Housing space per capita by type of house, city, and region 46 Table 4.6: Percentage of households using main sources oflighting 58 Table 4.7: Percentage of households using main sources oflighting 58 Table 4.8: Percentage of households having toilet by central city 59 Table 4.9: Percentage of households having toilet by central city 60 Figure 1: Diagram of components of the multidimensional poverty index from Alkire and Santos (2010) 13 Figure 2: Diagram of dimensions and indicators of the MPI 24 vi ACRONYMS ADB Agricultural Development Bank GSO General Statistics Office HDI Human Development Index HHP Household Prestige MDG Millennium Development Goal MPI Multidimensional Poverty Index oss Occupational Status Score VHLSS Vietnam Household Living Standard Survey VND Vietnam Dongs vii - - - - - - - - - - CHAPTER I INTRODUCTION 1.1 Problem Statement The "poverty" always appears into all historical periods of each country and each region The poverty problems have been seen different perspectives Many people from developing countries usually think that developed countries have the availability of enormous economic resources allowing these countries free of poor In fact, the poverty is a global issue not only in developing countries but also in developed countries For instance, the United State has over 12 percent of the population lives below the official poverty line and over one fifth of the children growing in officially poor family (Udaya Wagle, 2008) The developing countries have striven for poverty alleviation through many different subsidization policies and programs Moreover, previous studies in developing countries often focused on rural areas to evaluate poverty, inequality, and household living standard by traditional money-metric measure However, the researchers and policymakers have recognized that the poor suffer from not only income or expenditure below the poverty line but also other aspects That's why the researchers have tried to explore alternative approaches to define the poor into many aspects These new approaches such as the Household Asset Index (Filmer and Pritchett 1998), the Occupational Status Score (OSS), the Household Prestige (HHP) Score, and the capital SES, The Human Poverty Index (OPHI and UNDP 2010) and Multidimensional Poverty Index (Alkire and Santos, 201 0) have used to evaluate not only household living standard but socio-economic position, chronic poverty, deprivations as well In particular, the Multidimensional Poverty Index (MPI) is the international measure used as an analytical tool to define the most vulnerable people, measure deprivations directly and discover the interconnections among severe deprivations that people face at the same time The results of previous researches using MPI measure have showed the differences among cities also having the main source of lighting are electricity grid and only some survey households use other sources of lighting with less than 2.00% Table 4.6: Percentage of households using main sources oflighting (m2) 1.00 ~o~,t"o o.to Source: General Statistics Office's result from VHLSS 2008 According to the definition in this thesis, if the households have no electricity they deprived with electricity indicator and become the electricity poor Table showed that the improvement of household's living standard is significantly impressive in five urban central cities (100.00%) using electricity grid Therefore, 555 observed households in five urban central cities are the electricity non-poor Table 4.7: Percentage of households using main sources of lighting(%) Source: Author's calculation based on sub sample from VHLSS 2008 (n = 555) 58 4.4.15 Poverty comparison by sanitation indicator Sanitation is an important indicator to evaluate the living standard of households In the some regions, households usually use the shared toilet, no toilet, or toilet directly over the water The toilet system is not suitable will easily outbreak the diseases from households to others, especially the diarrhea disease The sanitation figures from GSO's result showed that many households have the private improved toilets However, Table 4.8 showed that the Mekong River Delta had the highest percentage of toilet directly over the water (41.00%) This result is maybe due to the structure of complicated river system in Mekong River Delta and household's habit building the toilet directly over the water Table 4.8: Percenta2e of households havin2 toilet by central city (%) 20.60 12.50 0.40 7.20 8.60 2.70 41.00 7.70 Source: Data of General Statistics Office 's result from VHLSS 2008 According to the definition in this thesis, if the households have no toilet, no improved toilet, shared toilet, or toilet directly over the water, they deprived with sanitation indicator and become the sanitation poor Table 4.9 from sub sample (n = 555) showed that the first four urban central cities have the private improved toilet • 59 (more than 99.00%) Only some households have no toilet (0.80%) On the contrary, Can Tho City has the high percentage of toilet directly over the water (9 50%) and no toilet (11.90%) The result was maybe due to Can Tho City belongs to Mekong River Delta and household's habit The policymakers have to pay more attention with sanitation status in urban Can Tho in order to timely subsidy to prevent the disease outbreak Table 4.9: Percenta2e of households havin£ toilet by central city (m2) - 11.90 Source: Author's calculation based on sub sample from VHLSS 2008 (n = 555) In comparison between GSO's result and author's result, the observed households in five urban central cities have the flush toilet with septic tank, sewage pipes (99.20%) higher than entire urban region (78.70%) and significantly higher than rural region (25.90%) Moreover, there remained many households with toilet directly over the water so high in rural region (12.30%), Mekong River Delta with 41.00% in Table 4.8, and Can Tho City (9.50%) in Table 4.9 These households called "the sanitation poor" and need the subsidy from government to improve the toilet in order to increase their living standard 60 CHAPTERS CONCLUSIONS AND POLICY IMPLICATIONS This chapter divided into three sections Section 5.1 provides a brief summary of the objectives, methods, dimensions and indications in thesis; section 5.2 describes general conclusions from the MPI analysis; and Section 5.3 suggests some recommendations to policymak:ers from the findings of analytical result 5.1 Summary The information on income or expenditure is one of the tools to assists policymak:ers and planner giving the subsidy to alleviate poverty in Vietnam However, the income and expenditure measure has some disadvantages to evaluate the poverty Hence, researchers have tried to explore new alternative measures to supplement money-metric measure In this thesis, the MPI alternative method used to identify the severe deprivations of the poor households in urban central cities, reveal interconnections among those deprivations, compare the urban poverty ratio between headcount (H) into MPI and headcount into money-metric measure, and compare the urban poverty between five central cities The thesis's findings based on the sub sample (n = 555) of extracted available household from VHLSS 2008 and MPI measure will assist the policymakers look urban poor at the multidimensional level, realize the difference in poverty rate between MPI and money-metric measure, and allocate effectively the resources to poverty alleviation in five urban central cities The thesis used five dimensions including education, health, standard of living, economic well-being, and employment with equally weight to estimate the poor household at multidimensional level In addition, there fifteen indicators or sub( dimension) have equal weight, and defined into five dimensions in order to assist to evaluate the poor households Those indicators include: years of schooling, underschooling - 15, adult illiteracy, hospital payment, working time, chronic sickness with same weight (6.67%); sanitation, drinking and cooking water, electricity, assets, 61 - housing space, home ownership, type of dwelling with same weight (2.86%); average expenditure weight (20.00%), and underemployment weight (20.00%) 5.2 Conclusions The thesis has examined the poor households in five urban central cities including HaNoi, Hai Phong, Da Nang, Ho Chi Minh, and Can Tho City in Vietnam at the multidimensional level by five dimensions and fifteen indicators The following conclusions come from the MPI analysis Firstly, the poverty rate from MPI measure is significantly higher than moneymetric measure In particular, the top four indicators affect mostly to the MPI poor in urban central cities including type of dwelling, underemployment, housing space, and working time Besides the bottom five indicators affect less to MPI poor including average expenditure, cooking and drinking water, under-schooling - 15, sanitation, and years of schooling Especially the survey households in urban central cities are not electricity grid poor Secondly, Ho Chi Minh and Can Tho City have the highest urban MPI poor with 22.50% and 21.43% respectively Those MPI poor suffer from average deprivation intensity 27.37% of indicators in Ho Chi Minh and 26.35% of indicators in Can Tho The MPI poor are lowest level in Hai Phong City (8.30%) and those MPI poor suffer from average deprivation intensity at the highest level (28.19%) Finally, the thesis's poverty rate result by multidimensional level in urban central cities is significantly higher than the GSO's result in entire urban region in Vietnam In particular, there are the big gap in poverty ratio between each city by MPI result and GSO result Moreover, the MPI poor suffer from deprivation of many indicators at the same time and the level of deprivation is quite different from each indicator as type of dwelling (22.25%), electricity (0.00%) 5.3 Policy implications 62 In VietNam, poverty and quality of life have never received fully attention at multidimensional level Many researchers and policymakers only concerned the economic aspect related to the economic ability to achieve the basic demand through official poverty line making significant effects to almost all policymaking and administrative purpose However, the poverty line does not really provide adequate meanings to maintain a basic life of household, especially in the modem life nowadays The findings ofMPI analysis based on sub sample (n = 555) from VHLSS 2008 in five urban central cities in order to suggest important policy implications in order to reduce poverty There some new findings derived from the thesis result including the high MPI poverty rate in urban central cities, indicators affecting mostly to MPI poor such as type of dwelling, underemployment, housing space, education, sanitation, drinking and cooking water, and working time in five urban central cities The new findings assist the policymaker looked fully back poverty in urban central city at multidimensional level and gave specific subsidy program to solve on each indicator These are some recommendations from the new findings in the thesis Firstly, type of dwelling has significant effect to MPI poor in five urban central cities In particular, Can Tho City had 40.45% of households using the semi-permanent and temporary house The policymakers in urban central city should appropriate subsidy to those poor households in order to improve type of dwelling and support those households having the permanent houses The government should think to let the poor household got loan with low tax or free tax, depending on each specific situation Secondly, quality of life of households will improve significantly through income However, the MPI result showed that underemployment so high in urban central cities It increased the poor households in these cities The following solutions should be reviewed by policymakers in central city ( 1) Set up the employment introduction meeting and invite the workers, companies that share conditions to employ the workers; (2) usually train the labor skill for worker with free fee in 63 industrial zones in order to attract the corporate; (3) establish the practical exercise for student; (4) create the good conditions to attract the foreign company investment; (5) take more investigation why the survey households in urban cities having high underemployment rate and allocate the subsidy timely and effectively Thirdly, another of new finding in MPI analysis that many observed households in Can Tho using the toilet directly over the water It is so dangerous for living standard of citizens The bad sanitation will make the disease easily to outbreak and shed the disease from regions to regions Therefore, government agencies in Can Tho should look at sanitation at the major priority to increase the quality of life and give the suitable solutions It can be give loan with free tax to the poor households to build toilet or organize the volunteer campaign team to canvass the rich households supporting to the poor households and explain why the rich households need to support the poor (it is maybe because preventing the disease outbreak to them) Fourthly, the resource of drinking and cooking water has the important effect to human being health In the MPI result, majority of survey households receive the clean water However, Can Tho City remained many households using rain-water and river water These households need the subsidy timely from government agencies because of not only improving living standard but also preventing sickness for them The amount of observed households using rain-water and river are not so much in five urban central cities Thus, the government agencies can use especial subsidy to these households by giving the water process machine or provisionally supplying water free to them, explaining what the risks they will get if they use the river water and rain-water, and encouraging those households using other sources of water more sanitary Finally, one of the important strategies to alleviate poverty is improvement of the educational system at all levels and assistance of households escaping poverty by increasing educational level The thesis's result showed that Can Tho and Ho Chi Minh City had very high adult illiteracy with 11.90% and 11.67% respectively It definitely 64 affect to child education of those households In facts, the MPI analysis discovered that the under-schooling of child - 15 years old in Can Tho and Ho Chi Minh City also have high rate with 4.76% and 2.92% respectively higher than other central cities at the research time This will be a big barrier in the economic development of those households in Can Tho and Ho Chi Minh City The government agencies in Can Tho and Ho Chi Minh City should pay more attention in educational indicator in urban areas The feasible solutions are to check what the real reason that make educational poverty rate is high in survey areas and then allocate resources more effective It can be to build more schools for low educational levels and set up the suitable educational system at all levels The State should have policies to exempt tuition for all the 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author by type of dwellings City temporary and other house Author's GSO's Author's estimation result estimation 6.35 0.5 Semi-permanent Permanent house GSO's result 75.1 Author's estimation 93.65 GSO's result 24.4 HaiPhong 48.1 68.33 50.4 31.67 1.5 DaNang 38.3 41.38 59.1 55.17 2.6 3.45 HoChiMinh 47.6 64.17 48.6 34.58 3.9 1.25 Can Tho 14.2 14.29 56.2 76.19 29.6 9.52 HaNoi Appendix 2: The deprivation quantity in each indicator in five central cities Indicator weight Years of schooling 6.67 Ho Chi Minh Under-schooling - 15 6.67 0 10 Adult illiteracy 6.67 28 45 Hospital payment 6.67 16 Working time 6.67 24 15 23 49 116 Chronic sickness 6.67 8 25 Electricity 2.86 0 0 0 Sanitation 2.86 0 12 Drinking and cooking water 2.86 0 Assets 2.86 18 Housing space 2.86 27 17 18 62 131 • Indicators (%) Ha Noi Hai Phong Da Nang 72 Can Tho Total 15 ... having utilized the alternative measure to define multidimensional poverty This thesis implemented to examining the multidimensional urban poverty in five central cities in Viet Nam, including... indicators in assessment of the city poverty These indicators include income poverty indicators regarding to poverty rate (incidence), poverty gap, poverty severity or extreme poverty rate (incidence)... IV: MULTIDIMENSIONAL POVERTY IN CENTRAL CITY 4.1 Overview of five central cities 34 4.2 Review of poverty in five urban central cities 34 4.2.1 The poverty head count ratio in money-metric