Multidimensional poverty in the Southern region in Vietnam in the South of Vietnam

UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM ERASMUS UNVERSITY ROTTERDAM INSTITUTE OF SOCIAL STUDIES THE NETHERLANDS VIETNAM – THE NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS MULTIDIMENSIONAL POVERTY IN THE SOUTHERN REGION OF VIETNAM BY TRUONG DAT ANH MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, OCTOBER 2016 Page | i UNIVERSITY OF ECONOMICS HO CHI MINH CITY VIETNAM INSTITUTE OF SOCIAL STUDIES THE HAGUE THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS MULTIDIMENSIONAL POVERTY IN THE SOUTHERN REGION OF VIETNAM A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By TRUONG DAT ANH Academic Supervisor: DR TRAN TIEN KHAI HO CHI MINH CITY, OCTOBER 2016 Page | ii DECLARATION I assure that the entire contents of this thesis (Multidimensional poverty in the Southern region of Vietnam) are written by me and the contents are based on my knowledge and my review of literature This thesis has not been submitted for any degree and I am responsible for entire contents I wrote TRUONG DAT ANH Page | i ACKNOWLEDGEMENT I would like to express profound thanks to A/Prof TRAN TIEN KHAI because of the dedicated guidance and supports during thesis time The opinions and comments of supervisor play a significant role in my thesis Moreover, I sincerely thank Prof NGUYEN TRONG HOAI, Dr TRAN KHANH NAM, Dr TRUONG DANG THUY and lecturers – officers of Vietnam Netherland program Thanks to lecturers, I have accumulated a variety of knowledge to finish study modules and support for my thesis Finally, I wish lecturers had many success and advantages in career in the future and a growing number of research projects to contribute for the economy of Vietnam Page | ii ABBREVIATION GSO: General statistics offices WB: World Bank WHO: World health organization MPI: Multidimensional poverty index VHLSS: Vietnamese Household Living Standard Survey GDP: Gross domestic product Page | iii ABSTRACT This thesis researches about multidimensional poverty in rural area of the Southern region of Vietnam The research scope is 19 provinces, separated into area the Southeast region and the Southwest region Based on VHLSS 2014 data set of General Statistic Offices of Vietnam, 1977 households have filtered to examine Alkire & Forster approach have applied and established a framework include 20 indicators and dimensions, which are suitable for the reality and data availability in the Southern region of Vietnam Using the methods of Chi2 test and descriptive statistics, this thesis found some relationships between household characteristics and poverty status Besides, there are some differences in poverty status among provinces and areas Hence, poverty policies used for tackle poverty status should focus to reasonable targets to ensure efficient and effective Page | iv TABLE CONTENTS CHAPTER I: INTRODUCTION 1.1 Research problem 1.2 Research objective 1.3 Research question 1.4 Research hypothesis 1.5 Research scope 1.6 Organization of research CHAPTER II: LITERATURE REVIEW 2.1 Poverty and measurement 2.1.1 The concept and measurement of uni-dimension poverty 2.1.2 Concept and measurement of Multidimensional poverty 2.2 Empirical studies 11 CHAPTER III: RESEARCH METHODOLOGY 15 3.1 Research methodology 15 3.2 Multidimensional poverty index 15 3.3 Conceptual framework 18 3.4 Dimensions and indicators 23 3.5 Data sources 24 CHAPTER IV: RESULTS 26 Page | v 4.1 The choice of cutoff ratio k 26 4.2 Multidimensional poverty and uni-dimensional poverty 30 4.3 Multidimensional poverty across regions 31 4.4 Multidimensional poverty across provinces 33 4.5 Dimensions contribution to multidimensional poverty index 36 4.6 Household characteristics and multidimensional poverty 38 4.6.1 Poverty status and demographics of household 38 4.6.2 Poverty status and dimensions (indicators) 44 CHAPTER V: CONCLUSION 55 5.1 Summary 55 5.2 Conclusion and recommendation 56 5.3 Limitation and further research 58 References 60 Appendix 63 Page | vi APPENDIX Appendix 1: source of data in VHLSS 2014 63 Appendix 2: Spearman test result of five characteristics of a household 64 Page | vii AP LIST OF TABLES Table 2.1: Poverty threshold of Ministry of Labor, Invalid and Social Affairs in Vietnam from 1998 to 2015 .6 Table 2.2: Poverty threshold of General Statistic Office in Vietnam from 1998 to 2010 and later Table 2.3: dimensions and 10 indicators of General scheme 2015 11 Table 2.4: Livelihood assets and dimensions of Tran & Nguyen (2012) 13 Table 2.5: Set of dimensions and indicators of Salaza et al (2013) 14 Table 3.1: Choice of dimensions and indicators 19 Table 3.2: Dimensions and indicators 23 Table 3.3: Number of households in provinces 25 Table 4.1: The influence of cut off ratio k 26 Table 4.2: Spearman correlation result of indicators and income of household and p-value 29 Table 4.3: Gender of head of household and multidimensional poverty status 39 Table 4.4: Ethnic of head of household and multidimensional poverty status 40 Table 4.5: Number of member in household and multidimensional poverty status 41 Table 4.6: School year of head of household and multidimensional poverty status 42 Table 4.7: Age of head of household and multidimensional poverty status 43 Table 4.8: Poverty status and deprivations of indicators in dimension of education 45 Table 4.9: Poverty status and deprivations of indicators in dimension of employment 46 Table 4.10: Poverty status and deprivations of indicators in dimension of health 47 Table 4.11: Poverty status and deprivations of indicators in dimension of living standard 49 Table 4.12: Poverty status and deprivations of indicators in dimension of monetary 52 Table 4.13: Poverty status and deprivations of indicators in dimension of social capital 54 Page | viii Total Chi2 test Saving ownership 1623 354 Pearson chi2(1) = 54.1657 Pr = 0.000 Quality 76 Not deprived (0) Horizontal 92% 8% Vertical 5% 2% Quality 1547 347 Deprived (1) Horizontal 82% 18% Vertical 95% 98% Total 1623 354 Pearson chi2(1) = 5.2881 Pr = 0.021 Chi2 test Quality 1139 204 Not deprived (0) Horizontal 85% 15% Vertical 70% 58% Quality 484 150 Toilet facility Deprived (1) Horizontal 76% 24% Vertical 30% 42% Total 1623 354 Chi2 test Pearson chi2(1) = 21.0164 Pr = 0.000 1977 83 (4%) 1894 (96%) 1977 1343 (68%) 634 (32%) 1977 In this dimension, utilities is the most common indicator, which is represented for the accessibility of household to safe water source and electricity Household will considered deprived in this indicator if they cannot have both safe water source and electricity As can be seen in table 4.11, 1499 households over 1977 households is deprived in this indicator It means that only 24% households in rural area of the Southern region of Vietnam have both safe water source and electricity The poverty rate for these two subgroup of this indicator is similarly with 17% and 18% each P-value of Chi2 test is 0.529; it means that there is no relationship between this indicator and poverty status The next indicator of this dimension is waste treatment system of household As a result, 16% of household in rural area of the Southern region of Vietnam have no waste treatment system and they are polluting the environment About 286 households in the sample are deprived in this indicator and 31% of them are under poverty status, compared to 16% for not deprived subgroup Based on the result of Chi2 test, it can be concluded that household’s waste treatment system and poverty status is linked Page | 50 House status indicator represents for the quality of the house in which the family is living About 359 households are living in a level house, it means they are not having a decent house and they are suffering severe living condition More than 35% of these household are poor, compared to only 14% in subgroup with better living condition Hence, the relationship between this indicator and poverty status is significant by the result of Chi test with p-value is approximate The strongest relationship with poverty status is the one of asset ownership About 95 households have no common asset and they are considered deprived in this indicator More than 89% of these household is under poor status, compared to only 14% in not deprived subgroup This relationship is examined by Chi2 test and concluded significant with p-value approximate In other words, this indicator and poverty status is linked The fifth indicator in this dimension is crowding of a house As the information provided by the table, 190 households is suffering low space of habitat In other words, 10% of household of the sample are deprived in this indicator and 37% of them are under poverty status, compared to only 16% for not deprived subgroup Hence, it can be concluded that this indicator and poverty status is linked by significant result of Chi2 test Saving ownership represents for financial ability of household, which they can ensure for expenditure in the future There are 83 household have saving account in the sample, equal 4% This number is quite low and it means that household in rural area of the Southern region of Vietnam is weak at finance ability Only 8% of 83 households in not deprived subgroup experience poor status, compared to 18% of the other subgroup In other words, saving ownership status and poverty status is linked, by the support of Chi2 test with p-value is 0.021 The last indicator of this dimension is toilet facility About 68% of households of the sample not deprived in this indicator, equal 1343 households However, a large part of population in rural area of the Southern region of Vietnam is living with no toilet in their habitat About 32% of 1977 households is deprived in this indicator and 24% of them are experiencing poverty status, compared to only 15% in not deprived subgroup Based on p-value approximate of Chi2 test, it can be concluded that this indicator and poverty status is linked Page | 51 Dimension of monetary The next dimension is very important because it contains an indicators represented for unidimensional poverty There are three indicators in this dimension, “below poverty line”, “productive asset” and “not own a house” The following table illustrates the poverty rate for each indicator Table 4.12: Poverty status and deprivations of indicators in dimension of monetary Indicators Not deprived (0) Below poverty line Deprived (1) Total Chi2 test Not deprived (0) Productive asset Deprived (1) Total Chi2 test Not deprived (0) Not own a house Deprived (1) Total Chi2 test Non-poor Poor household households Quality 1609 304 Horizontal 84% 16% Vertical 99% 86% Quality 14 50 Horizontal 22% 78% Vertical 1% 14% 1623 354 Pearson chi2(1) = 163.1667 Pr = 0.000 Quality 737 45 Horizontal 94% 6% Vertical 45% 13% Quality 886 309 Horizontal 74% 26% Vertical 55% 87% 1623 354 Pearson chi2(1) = 129.9549 Pr = 0.000 Quality 1586 320 Horizontal 83% 17% Vertical 98% 90% Quality 37 34 Horizontal 52% 48% Vertical 2% 10% 1623 354 Pearson chi2(1) = 45.0337 Pr = 0.000 Total 1913 (97%) 64 (3%) 1977 782 (40%) 1195 (60%) 1977 1906 (96%) 71 (4%) 1977 As can be seen in table 4.12, indicator of below poverty line is the very important one It is used for uni-dimensional poverty and represents for income of a household About 3% of households in the sample have income lower than income poverty threshold of the Government In 64 deprived households, 78% of them are considered multidimensional Page | 52 poverty, compared to only 16% for subgroup with higher income than the threshold With these information and p-value of Chi2 test, there is a relationship between this indicator and multidimensional poverty status Besides, productive asset is also important and it might generate income for household in the future In this sample, about 1195 households is suffering insufficient cultivated land, equal 60% of the sample Low cultivated land mean low income; consequently, 26% of them are under poor status and only 6% of household in not deprived subgroup are poor In can be concluded that productive asset indicator and poverty status is linked with p-value is approximate by Chi2 test The last indicator of this dimension is house-owning status In rural area of the Southern region of Vietnam, 96% of them are own a house, equal 1906 household There are 71 households have no house and 48% of them are considered poor In other subgroup, only 17% of households own a house are considered poor Hence, the significant relationship between this indicator and poverty status is supported by Chi test and p-value approximate Dimension of social capital The last dimension need to be investigated is social capital with two indicators; “information accessibility” and “join any group” This dimension represents for household’s social relationship, which might influence their decisions According to table 4.13 below, 163 household have no phone to access the information from the society They might get many difficulties and hard to make reasonable decisions Therefore, 74% of them are considered multidimensional poverty, compared to only 13% in not deprived subgroup There is a strong relationship between this indicator and poverty status with the support of Chi2 test Last indicator is social capital, which represents for member status in social group of household As can be seen in the table, 1405 households is not in any group and they cannot access to member’s opportunities of social group Therefore, 24% of them are under poor status, while there is only 3% or 18 households over 572 households are considered poor in not deprived subgroup As a result, this indicator and poverty status is linked, with a support of Chi2 test and p-value is approximate Page | 53 Table 4.13: Poverty status and deprivations of indicators in dimension of social capital Indicators Not deprived (0) Information accessibility Deprived (1) Quality Horizontal Vertical Quality Horizontal Vertical Total Chi2 test Not deprived (0) Join any group Deprived (1) Total Chi2 test Poor households 1581 233 87% 13% 97% 66% 42 121 26% 74% 3% 34% 1623 354 Pearson chi2(1) = 383.4291 Pr = 0.000 554 18 97% 3% 34% 5% 1069 336 76% 24% 66% 95% 1623 354 Pearson chi2(1) = 119.2712 Pr = 0.000 Non-poor household Quality Horizontal Vertical Quality Horizontal Vertical Total 1814 (92%) 163 (8%) 1977 572 (29%) 1405 (71%) Page | 54 1977 CHAPTER V CONCLUSION The following section of this thesis is conclusion and policy recommendations There are a sort summary about the thesis and the main findings Based on those findings, some recommendations for policies makers will propose to improve the situation At the end of this section is the part of limitations and further researches 5.1 Summary Recently, multidimensional poverty approach is widely used on over the world; the turning point of uni-dimensional poverty to multidimensional poverty is a necessary move in Vietnam Especially, the Southern region is an important part of a country, which contributes dramatically into national GDP However, poverty and the measurement of poverty in the Southern region still an unsolved problem This research try to apply a new concept, multidimensional poverty into the reality of the Southern region The approach by Alkire & Forster methodology to measure multidimensional poverty have applied for this research to investigate some objectives First, determine suitable dimensions and indicators to measure multidimensional poverty After that, compare multidimensional poverty between two-separated region in the Southern, the Southeast region and the Southwest region Later on, this research will find out the differences of multidimensional poverty status among households Finally, recommend will be proposed based on the result Data used in this research is extract from VHLSS 2014 data set Only the data of households in rural area of the Southern region of Vietnam is kept, all others are eliminated Hence, 1977 observations have recorded in the data set of this research, included households in 19 provinces Included Binh Phuoc, Binh Duong, Tay Ninh, Dong Nai, Ba Ria – Vung Tau, Ho Chi Minh city, Long An, Tien Giang, Ben Tre, Vinh Long, Tra Vinh, Dong Thap, Hau Giang, Soc Trang, An Giang, Kien Giang, Bac Lieu, Ca Mau and Can Tho city Page | 55 After reviews several research in the world about this topic, this research is conducted by a set of dimensions and 20 indicators Six dimensions are education, employment, health, living standard, monetary and social capital All of these dimensions get equal weighted and each dimension gets 1/6 Cutoff poverty k is chosen by empirical studies and reasonable statistic In this research, cutoff poverty k is 0.3 The result of multidimensional poverty is much different with uni-dimensional poverty, which is based on income threshold of the Government 5.2 Conclusion and recommendation In Vietnam, the issue of poverty is commonly treated by monetary aspect, such as subsidies, tax reduction, favorable loans, etc However, as mentioned in the previous parts of this research, poverty is a multidimensional problem In addition, by uni-dimension approach, poverty rate is only 3.2% in the Southern region of Vietnam, compared to about 18% of multidimensional poverty rate Hence, some broader solutions is much better than just focus only on monetary perspective Dimensions aspect Based on the breakdown result of multidimensional poverty, six dimensions have different contribution to multidimensional poverty index The highest contribution to multidimensional poverty index is dimension of social capital, which is considered as new concern of the society This dimension contributes about 27% to poverty index, therefore, reduce deprivation in this dimension will help poverty rate decline dramatically According to this research, two indicators of this dimension “join any group” and “information accessibility” are strongly correlated with poverty status Hence, policy makers should enhance social capital for household in rural area of the Southern region of Vietnam More groups and networks should be established to help households accessing to new information and technology Besides, activities of groups and networks should be strictly managed and ensure efficient for the reality The government might subsidize for households who have no phone in order to help them to get the information easily The second place of contribution to multidimensional poverty index is living standard dimension Almost indicators in this dimension are significantly linked with poverty status; it means that to reduce poverty rate, living standard of households should be improved Toilet Page | 56 facility, quality of habitat and waste treatment system are strongly influence poverty status Hence, policy makers should propose more policies focused to these issues Conduct numerous promotions or social activities to subsidize and call households build decent toilet facility and waste treatment system in order to protect their health and increase living condition Furthermore, prefer loans with low interest rate is a good solution to stimulate the situation Households accessed to these loans might get better living conditions and increase working productivity for more income Beside living standard, employment contributes 19.5% to multidimensional poverty index In other words, job vacancies and commercial activities should be enhanced in this area to ensure income for households Export labor is a great solution in the situation of surplus worker in the Southern region In additional, the Government should encourage trading by reduce tax and create good condition for commercial activities Furthermore, specialization and apply new technology in agricultural activities should be encourage to stable working resource and income of households Monetary dimension is the fourth priority because its contribution is about 15% and other dimensions influence it Naturally, when three first dimensions are improved, income and financial ability of households will increase When households access to social groups and information, they might find for themselves opportunities to create income Better living condition, great commercial environment and decent living standard will help households make good decisions to get higher income and reduce deprivation in this dimension The rest two dimensions is health and education is a root cause of poverty These two dimension can be only influenced in long run An action on these dimensions might result in many years later Hence, in order to reduce poverty solidly, policy makers should care about these dimensions More schools and hospitals should be built and ensure quality of recent schools and hospitals Continue to apply subsidies and policies in education and health of the community In fact, if all of these dimensions get a proper care, productivity and income of households will increase constantly Geography aspect Overall, poverty rate is difference between the Southeast and the Southwest of Vietnam Average multidimensional rate of the Southeast is only 15.3%, compared to 19.4% in the Page | 57 Southwest Therefore, to reduce poverty rate in the Southern region of Vietnam effective and efficient, policy makers should focus the resource on the Southwest More specifically, living standard dimension of the Southwest is much worse than the Southeast (toilet facility, quality of habitat and waste treatment system) The solution is presented in the previous part At provinces scale, four provinces with highest poverty rate are An Giang, Kien Giang, Soc Trang and Ca Mau should be supported more Policy makers should propose more policies and subsidies for households in rural area of these provinces to allocate resource effectively; export labors is a good solution to be considered Poverty rate of the whole region might reduce significantly if these provinces can improve the situation Households’ characteristics aspect The last aspect needed to consider is characteristics of households As presented in the previous parts, this research found some relationship of poverty status among characteristics of household As a result, household heads with the following characteristics should get a proper care: female, ethnic minorities, less than years of education, more than 61 year old and 1-3 members in family In fact, 72% of households with those five characteristics are poor and about 50% to 78% households with four of those five characteristics are poor Subsidies and special policies should be imposed to households experienced those characteristics to ensure the limited resources are allocated fairly and effectively Furthermore, in the long-run, policies should focus on every one had these characteristics to ensure constantly growth and low poverty rate For examples, female should get some advantages or subsidies when study at school, elder people should get proper care and support from the community, etc Understanding the nature of poverty and household’s characteristics, policy makers might control the situation effectively and efficiently 5.3 Limitation and further research Similar as other research in multidimensional poverty, Alkire & Forster approach contains some limitation: First, the construction of dimensions and indicators might vary among authors Set of dimensions and indicators might different because of geography, culture, economics, data Page | 58 availability, etc It is difficult to compare multidimensional poverty among region or counties Therefore, use of dimensions’ and indicators’ sets built by trusted institution or author is the best solution Second, weights of each dimension and each indicator is an unsolved issue For convenience, Alkire & Forster suggest equally weighted However, in the reality, the influences of dimensions and indicators might different Consequently, poverty result might be biased Hence, a research to estimate exact or approximate weights is needed Next, Alkire et al (2015) suggested some model in micro and macro scale to investigate the determinant of multidimensional poverty However, there are several difficulties in endogeneity and cause/effect problems Finally, cutoff ratio k is the most crucial component for multidimensional poverty However, this ratio still have no particular formula or measurement method A further research to estimate this ratio is very important Page | 59 REFERENCES Alkire Sabina, (2009) Multidimensional poverty measures: new potential Busan, Korean OECD world forum Alkire Sabina et al, (2011) Multidimensional Poverty Index 2011: Brief Methodological Note Oxford Poverty & Human Development Initiative Alkire Sabina et al, (2014) Multidimensional poverty index 2014: Brief methodological note and result University of Oxford Alkire Sabina et al, (2015) Multidimensional Poverty Measurement and Analysis, OPHI working paper no 86, Queen Elizabeth House (QEH), University of 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Management Bangalore working paper Sen Amartya Kumar, (1976) Poverty: An Ordinal Approach to Measurement Econometrica Vol 44 (2) Pp.219-231 Salazar Roberto Carlos Angulo et al, (2013) Multidimensional Poverty in Colombia, 19972010 Institute for Social & Economic Research Suppa Nicolai, (2015) Towards a Multidimensional Poverty Index for Germany Ruhr Economic Papers Nguyen Tuan Anh, (2011) Vốn xã hội cần thiết nghiên cứu vốn xã hội nông thôn Việt Nam [Social capital and the necessary research social capital in rural Vietnam today] http://repository.vnu.edu.vn/bitstream/VNU_123/1562/1/Nguyen%20Tuan%20Anh pdf accessed on 30 august, 2016 Page | 61 Ngo Quang Trung, (2016) Đầu tư trực tiếp nước Việt Nam giai đoạn 1988 - 2015: Thực trạng vấn đề [Foreign direct investment in Vietnam in the period 1988 - 2015: Situation and Problems] http://www.ipd.org.vn/nghien-cuu-truong-hop-noi-bat/dautu-truc-tiep-nuoc-ngoai-o-viet-nam-giai-doan-1988-2015:-thuc-trang-va-van-de-tacgia:-ngo-quang-trung-a452.html accessed on 30 august, 2016 General Statistics Office of Vietnam https://www.gso.gov.vn, accessed on 10 September 2016 UNDP (2015) Growth for all Human Development Report 2015 about the growth of Vietnam Wraps Kurdistan Region Statistics Office, Iraq Central Statics Office (2013) Multidimensional Poverty Index for Iraq Decision No 170/2005/QD-TTg “Setting norms on poor households and households in danger of falling into poverty for the 2006-2010 period” Decision No 09/2011/QD-TTg “Setting norms on poor households and households in danger of falling into poverty for the 2011-2015 period” Decision No 59/2015/QĐ-TTg “Sromulgating multidimensional poverty levels applicable during 2016-2020” Page | 62 APPENDIX Appendix 1: source of data in VHLSS 2014 Variable name hhedu children hhunemploy munemploy insurance hproblem food hmoney noulti nowaste houselv noasset avg saving notoilet income File name muc2a muc2a muc4a muc4a muc3c muc3a muc8 muc3b muc7 muc8 muc9 muc6a muc7 muc82 muc7 Can_doi Productive asset m2 muc4b11 muc4b12 muc4b13 muc4b14 Not own a house Information accessibility join any group nohouse nophone group Indicators Education acheivement Education of children Head of household unemployment Male unemployment Health insurance Number of member got problem in health Nutrition Insufficient money for health service Ultilities Waste House status Asset ownership Crowding saving ownership toilet facility Below poverty line muc7 muc6a muc1a Page | 63 Appendix 2: Spearman test result of five characteristics of a household Page | 64