Spatial analysis of income sources at province level in vietnam

VIETNAM NATIONAL UNIVERSITY, HANOI VIETNAM JAPAN UNIVERSITY NGUYEN THU HANG SPATIAL ANALYSIS OF INCOME SOURCES AT PROVINCE LEVEL IN VIETNAM MAJOR: MASTER’S PROGRAM OF PUBLIC POLICY CODE: ………………… RESEARCH SUPERVISOR: Prof MORITO TSUTSUMI Hanoi, 2019 TABLE OF CONTENTS CHAPTER 1: INTRODUCTION 1.1 Background of the study 1.2 Rationale of the study 1.3 Objectives of the study 1.4 Research questions 1.5 Significance of the study 1.6 Design of the study CHAPTER 2: LITERATURE REVIEW 2.1 Spatial analysis 2.2 Income as an aspect of livelihoods 2.3 Background of ethnicity and income structure in Vietnam 2.3.1 Ethnic geographical distribution in Vietnam 2.3.2 Poverty distribution by ethnicity in Vietnam 2.3.3 Changes in Vietnam‟s income structure in Vietnam 10 2.4 Previous studies 11 CHAPTER 3: METHOD AND METHODOLOGY 14 3.1 Method and methodology 14 3.2 Data collection 17 CHAPTER 4: FINDINGS AND DISCUSSIONS 19 4.1 Area of Study 19 4.1.1 An overview 19 4.1.2 Economic growth 21 4.1.3 Production of agriculture, forestry and fishery 22 4.1.3 Industry 23 4.1.4 Service activities 24 4.1.5 Development investment 24 4.2 Descriptive statistics 25 4.3 Changes in income sources in Vietnam 2008-2016 77 4.4 Discussions 82 CHAPTER 5: CONCLUSION AND RECOMMENATIONS 85 5.1 Conclusion 85 5.3 Limitations 87 5.4 Suggestions for the further studies 88 REFERENCES 89 LIST OF TABLES Table 1: A comparison of Spatial regression models and OLS regression model 27 Table 2: A comparison of Spatial regression models and OLS regression model Year: 2008 Dependent variable: Income from Agric (million VND) 30 Table 3: A comparison of Spatial regression models and OLS regression model Year: 2008 Dependent variable: Income from Nonagric (million VND) 32 Table 4: A comparison of Spatial regression models and OLS regression model Year: 2008 Dependent variable: Income from Wages (million VND) 34 Table 5: A comparison of Spatial regression models and OLS regression model Year: 2008 Dependent variable: Income from Other sources (million VND) 35 Table 6: A comparison of Spatial regression models and OLS regression model Year: 2010 Dependent variable: Total income (million VND) 37 Table 7: A comparison of Spatial regression models and OLS regression model Year: 2010 Dependent variable: Income from Agric (million VND) 39 Table 8: A comparison of Spatial regression models and OLS regression model Year: 2010 Dependent variable: Income from NonAgric (million VND) 41 Table 9: A comparison of Spatial regression models and OLS regression model Year: 2010 Dependent variable: Income from Wages (million VND) 43 Table 10: A comparison of Spatial regression models and OLS regression model Year: 2010 Dependent variable: Income from other sources (million VND) 45 Table 11: A comparison of Spatial regression models and OLS regression model Year: 2012 Dependent variable: Total Income (million VND) 48 Table 12: A comparison of Spatial regression models and OLS regression model : 2012 Dependent variable: Income from Agric (million VND) 50 Table 13: A comparison of Spatial regression models and OLS regression model Year: 2012 Dependent variable: Income from Nonagric (million VND) 52 Table 14: A comparison of Spatial regression models and OLS regression model Year: 2012 Dependent variable: Income from Wages (million VND) 54 Table 15: A comparison of Spatial regression models and OLS regression model Year: 2012 Dependent variable: Income from other sources (million VND) 56 Table 16: A comparison of Spatial regression models and OLS regression model Year: 2014 Dependent variable: Total Income (million VND) 58 Table 17: A comparison of Spatial regression models and OLS regression model Year: 2014 Dependent variable: Income from agric (million VND) 60 Table 18: A comparison of Spatial regression models and OLS regression model Year: 2014 Dependent variable: Income from Nonagric (million VND) 62 Table 19: A comparison of Spatial regression models and OLS regression model Year: 2014 Dependent variable: Income from wages (million VND) 64 Table 20: A comparison of Spatial regression models and OLS regression model Year: 2014 Dependent variable: Income from other sources (million VND) 66 Table 21: A comparison of Spatial regression models and OLS regression model Year: 2016 Dependent variable: Total Income (million VND) 68 Table 22: A comparison of Spatial regression models and OLS regression model Year: 2016 Dependent variable: Income from Agric (million VND) 70 Table 23: A comparison of Spatial regression models and OLS regression model Year: 2016 Dependent variable: Income from NonAgric (million VND) 72 Table 24: A comparison of Spatial regression models and OLS regression model Year: 2016 Dependent variable: Income from wages (million VND) 73 Table 25: A comparison of Spatial regression models and OLS regression model Year: 2016 Dependent variable: Income from other sources (million VND) 75 LIST OF FIGURES Figure 1: The changing rate of total income between 2008 and 2016 77 Figure 2: The changing rate of income from wages between 2008 and 2016 78 Figure 3: The changing rate of income from Agriculture, Forestry, Fishery between 2008 and 2016 79 Figure 4: The changing rate of income from Non-Agriculture, Non-Forestry, Nonfishery between 2008 and 2016 80 Figure 5: The changing rate of income from other sources between 2008 and 2016 81 ABBREVIATION SDM Spatial Durbin model SLM Spatial Lag Model SEM Spatial Error Model OLS Ordinary Least Square GIS Geographic Information system GDP Gross Domestic Product CPI Consumer Price Index ASEAN Association of South-East Asian Nations WTO World Trade Organization HDI human development index UNDP United Nations Development Programme Agric Income from Agricultural, Forestry and Fishery activities NonAgric Income from Non- Agricultural, Non-Forestry, Non-Fishery activities Other Income from other sources Wages Income from Wages Total The total income VHLSS Vietnam Household living standards survey ACKNOWLEDGEMENT In order to complete my thesis, I have received many advices and guidance from my supervisor - Professor Morito Tsutsumi as well as my friend Rim Er-rbib Thank to professor Morito Tsitsumi, I can acquire more knowledge and more skills Before coming back to VietNam, my supervisor gave me a valuable book that helps me a lot to complete this thesis With all my respect and gratitude, I would like to express my sincere appreciation to: My supervisor, Professor Morito Tsutsumi for his inspiring guidance and great support throughout my thesis procedure His insightful advices and scientific knowledge has inspired me and helped me in improving research and preparation for my Master thesis He also supported me a lot to get the data of FDI licensed projects which seemed really hard to acquire Without his great support, I cannot finish my thesis My academic tutor, Ms Rim Er-rbib, for her useful support and encouragement, who is always willing to help and gave me so many useful and constructive instructions especially for how to use GIS software University of Tsukuba and Vietnam Japan University for giving me such a excellent environment with so many amazing people Finally, I would like to thank my family for being a wonderful moral support that gives me so much motivation and enthusiasm to overcome the challenges and difficulties in writing this thesis Student, Nguyen Thu Hang CHAPTER 1: INTRODUCTION 1.1 Background of the study Vietnam has been through a rapid economic growth in the last three decades The characteristics of this rapid growth are the decline of the number living in poverty and the rising average income Since the 1990s, there has been nearly 30 million people overcoming the poverty line More specifically, the GDP per capita from 1990 to 2015 has increased from $100 to $2,300, respectively (Oxfam, 2017) In the last 30 years, the average of the economic growth has increased from 5-6 percent to 6.4 percent The rapid growth especially the increasing economic has several impacts on the Vietnamese On the one hand, it improves people‟s living standards However, it also causes the economic inequality as well as the uneven opportunity among people Which means the equal distribution of income of the people has an important role in a society with high equality So now the challenge is that in the situation of the rapid economic growth how does Vietnam make solutions so that the distribution of income across Vietnam becomes much more equal The rapid economic growth and the good policies in the last 30 years have significant contribute to poverty reduction However, the gap between the rich and the poor has been expanding seriously This gap has been causing many social problems and need to be solved as soon as possible So the Government need to issue new policies that ensure the poverty and the inequality will be controlled According to Saumik et al (2016), while Vietnam experiencing the economic structural transformation as well as the poverty reduction, the growth is more beneficial for the rich than the poor This is realized as the returns to manufacturing and to agriculture increasing only for the top 10th - 20th percentiles In general, the economic inequality has been rising dramatically in the last twenty years According to Oxfam (2017), in one day, the Vietnamese richest man earn more than the poorest earns in 10 years This man possessed assets worth $2.3bn which could be used to help 13 million poor people to get out of poverty According to the World Bank (2013), from 1992 to 2012, the Gini index has risen from 35.7 to 38.7, showing that the income inequality rose However, this kind of data may underestimate the serious impacts that inequality can have on Vietnam For example, the expenditures or the income of rich individuals may be under-reported in the household surveys, so the empirical measures of inequality may be biased Since 2004, among the first four quintiles (the bottom 80 percent) there is a small difference in the income distribution However, in comparison between those quintiles with the richest quintiles (the top 20 percent), the income distribution has been widening significantly In other words, the benefit of growth has been distributed unequally in recent years This is consistent with the report conducted by Oxfam in 2016 The survey did depth-interview with 600 respondents from three provinces (Lao Cai, Nghe An, Dak Nong) The results showed that the income of the 20 percent of the richest households is 21 times higher than that of the 20 percent of the poorest households.There is one point suggesting that income at the province level is serious and has been increasing over time, especially in the remote areas where agriculture is the main source of income (Lam et al., 2016) Therefore, it is necessary to look into the income sources at province level to justify the income disparity 1.2 Rationale of the study It is revealed by the evidences in the research by Nguyen (2016) that reductions in poverty and dividends from growth have been spread unevenly across Vietnam, increasing income inequality between regions and to some extent within regions By region, the Red River Delta and the South East are considerably overrepresented in middle income groups, whereas the Mekong River Delta is overrepresented in the nearpoor group The North West and Central Highlands are the two regions where most of 4.3 Changes in income sources in Vietnam 2008-2016 Figure demonstrates the total income of Vietnam from 2008 to 2016 Figure 1: The changing rate of total income between 2008 and 2016 Figure reveals that the provinces in Red River Delta and Southeast regions are those with the highest levels of income while the Northwest and North Central Coasts provinces are recorded with the lowest levels of income This income pattern is similar from 2008-2016 Figure shows the changing rate of income from wages between 2008 and 2016 77 Figure 2: The changing rate of income from wages between 2008 and 2016 Provinces with darker color in Red River Delta and Northeast regions represent the larger changing rate of income from wages These provinces have the same common things such as being attractive to FDI, having good policies for development and the rate of urbanization is fast The changing rate of income from Agriculture, Forestry, fishery between 2008 and 2016 is presented in Figure 78 Figure 3: The changing rate of income from Agriculture, Forestry, Fishery between 2008 and 2016 Some provinces in the North (Hanoi, Hai Phong), North Central (Ha Tinh, Quang Binh), South Central Coast (Binh Dinh, Phu Yen, Khanh Hoa, Daklak), South East, Mekong deltal river experience the high changing of income in term of agriculture, fishery and forestry The common thing of these provinces is that they are located next to the beach, some of them are concentrated along the two largest plains of the country (Red river and Mekong Delta river) which provide them great nature (the weather, soil, etc), some of them apply the advanced technology such as Soc Trang province 79 Figure shows the changing rate of income from Non-Agriculture, Non-Forestry, Nonfishery between 2008 and 2016 Figure 4: The changing rate of income from Non-Agriculture, Non-Forestry, Nonfishery between 2008 and 2016 Provinces from North-west, North center and South-east of Viet Nam experience a high changing rate of income from non –agriculture, non-fishery, non-forestry 80 The common thing among these provinces is that they are concentrated quite near the two largest plains, and thus, they can focus on the activities which not directly create products from agriculture, fishery and forestry Lastly, Figure demonstrates the changing rate of income from other sources between 2008 and 2016 Figure 5: The changing rate of income from other sources between 2008 and 2016 Other income is classified as income from gifts, savings, etc The rate of changing income from others is larger at poor provinces 81 4.4 Discussions There was a transition in income sources at the provincial level during the given period in this current study Firstly, it is proven that there is in comparison to income sourced from non-agricultural activities, income from agricultural activities tend to significantly shrank during 2008-2016 With reference to the four income categories including agriculture, non-agriculture, wages and others, the income generated from wages is ranked with the highest proportion which is followed by non-agriculture, agriculture and other sectors It is calculated that the contribution of wages to the total income in Vietnam has drastically increased from less than 31% in 2008 to 46% in 2016 Despite the rapid and significant increase in the proportion of income sourced from wages, this portion is relatively smaller than that of those countries in the same group The report by ILO (2016) on the global wages shows that in developing countries more than 60% of the national income is attributed to wages and salary Owing to FID investments into such provinces as Hanoi, Bac Ninh, Quang Ninh, Vinh Phuc, Dong Nai, Binh Duong, and Ho Chi Minh City, many people are employed by manufacturing firms in the industrial zones in these provinces The employment from these industrial zones has boosted the income amount generated from wages and salary Other provinces also enjoyed a small increase in the income sourced from wages and salaries Following wages and salary, incomes sources from non-agriculture sectors such as manufacturing or real estates are the second largest source for the total income in Vietnam During 2008 and 2016, incomes from non-agriculture activities accounted for more than 20% of the total income In contrast, incomes from other sources has experienced a downward trend during the given period The contributing portion of this sector decreased from 19% to 12% during 2008-2016 These findings regarding the sources of income in Vietnam during the period indicate that there is a shift in the income structure of Vietnam from a heavily agricultural reliance country to a less 82 agricultural reliance country It is also realized that such centrally controlled municipal provinces as Hanoi, Ho Chi Minh City, Quang Ninh, Hai Phong, etc present an upward trend in the income amount sourced from non-agriculture sectors such as manufacturing or services while such provinces as Da Nang, Khanh Hoa, Quang Ninh, Kien Giang, Phu Yen, etc have shifted their income structure from agriculture reliance to tourism and service reliance Changes in income structure vary across provinces There is a significant fall in the amount of income generated from agriculture activities in such high-income provinces as Red Delta River and Southeast provinces in Vietnam Contrastively, the poor provinces still present a heavy reliance on agricultural activities for income generation In other words, the incomes sourced from wages and salaries, non-agriculture activities and other sectors account for the smaller portions in the income structure In the provincial level, while such provinces in Red River Delta as Ninh Binh, Thai Binh, Hai Duong have decreased their income dependence on agriculture sector (from 43.6% in 2008 to 18.9% in 2016) other provinces as An Giang, Ca Mau, Dong Thap, Long An, Soc Trang, Tien Giang, Tra Vinh, and Vinh Long still maintain the significant contribution of agriculture to the total provincial income In summary, there is a rapid and constant increase in the contribution of incomes generated by wages in all provinces in Vietnam Despite the faster growth rate in the incomes by wages in poorer provinces of Vietnam, the contribution of wages to the total income in these provinces is still much lower than that of rich provinces Additionally, although the declining contribution to the provincial and national income, agriculture has still maintained their important role in income generation of all provinces in Vietnam The analysis indicates the following findings: i The total income of one province has spatial correlation by that of the neighboring provinces The total income is mostly affected positively by the trained labor force, the 83 immigration, the farms And the trained labor force has competitive effect among provinces due to the negative value of parameter of the variable spatially lagged percentage of workers aged 15 and over who are working in a trained economy by provinces The more man over 100 females, working labor force, immigration rate of the neighboring provinces, the less total income in the observed province From 2008 – 2010, the more FDI projects licensed in neighboring provinces the more total income in the observed province ii Income from wages of one province has positive spatial correlation by that of the neighboring provinces The trained labor force and the immigration rate play an important role and have competitive effect among provinces The number of farms of the neighboring provinces have positive effect on the observed unit From 2008 to 2010 the FDI projects has positive effects among provinces but later in 2014 it has competitive effect (when the market is more stable than the crisis time) iii Income from Agriculture, Forestry, Fishery activities: in the crisis period 2008 to 2010, this variable is affected by that of neighboring province (when people focused more on agriculture) The trained labor force plays negative role for this variable but the variables number of farms, sex ration have direct effect From the year 2012, there is spatial correlation of farms among provinces (sharing knowledge, creating jobs serving farming, etc) The more immigration rate in the neighboring provinces the more income from Agricultura (because there will be more land for farming) iv Income from Non-Agriculture, Non-Forestry, Non-Fishery activities is basically affected by that of neighboring provinces in the year 2010 – 2012 The trained and the immigration rate still play an important role and have competitive effect The number of man as well as the number of farms have directly negative effect v Income from other sources: the more trained labor force, registered capital, FDI projects licensed (has positive spatial effect) The more income from other sources The more man over 100 females (including from neighboring provinces) and working labor force the less income from other sources 84 CHAPTER 5: CONCLUSION AND RECOMMENATIONS 5.1 Conclusion The investigation into the income in Vietnam during 2008-2016 indicates that in this period Vietnam has experienced a significant improvement in the average level of income per capital, contributing to the progress of reduction poverty of the country Despite the improvement, there is an inherent problem raising the concerns of the policymakers due to their impacts which is the income disparity The research by Kozel (2014) indicates that there is hardly any improvement in income inequality in Vietnam for the ten-year period This income disparity mainly results from the less diversity of income sources and the distribution of income across the provinces in Vietnam Consequently, the challenge to diversify the sources of income been becoming an important issue for researchers and policymakers This study uses the spatial analysis method to investigate the current situation of income sources among provinces in Vietnam; and to explore the influencing factors as economic and demographic variables affect the income sources among provinces in Viet Nam during the given period of 2008-2016 The analysis indicates the following findings: (i) Over the period of study, there are some significant changes in the structure of income in provinces across Vietnam There is a sharp rise in the contribution of income generated by wages to the total income in all provinces in Vietnam This source of income accounts for nearly a half of the total income in the provinces with high income in such areas as Southeast and Red River Delta regions and 40% for other provinces However, the provinces with lower total income experienced a faster growth rate than their counterparts, richer provinces 85 (ii) Among all the four sources of income, the sector of non-agriculture is ranked as the second largest source of income for rich provinces in Vietnam Contrastively, this source only represents about 14% of the total income generated in poorer provinces The portion of income generated from agricultural cultivation is much higher than incomes from other sources in the poorer provinces In such rich provinces, the portion of income generated from agricultural activities has experienced a stable and constant decrease during the given period (iii) The expanding income generated by wages and salary has increasingly expanded the income disparity in Vietnam during 2008- 2016 However, there is an increasingly even distribution in wages generated from wages because of the increasing amount of wages in the households with the low income levels (iv) Incomes by wages and non-agriculture sectors are the major and powerful drivers to the changes in the total in the provinces in Vietnam Although the share of agricultural activities to the total income of both groups of provinces has decreased, however, these sources of income are also the important contribution to the income disparity in Vietnamese provinces While in the rich provinces incomes from wages account for the larger portion, it is contrastive with the poorer counterparts with the large contribution of agricultural activities 5.2 Recommendations It is realized that although the decreasing contribution of agricultural activities to the total income the promotion measures to this sector also boost the income for those with the lowest levels of income distribution, contributing to the shrinking income gap among the provinces in Vietnam The reason is that although the income generated from the agricultural sector takes the role as the source of income disparity in Vietnam, agricultural activities are the major sources for the poorer households in Vietnam According to Tuyen (2015), although there are arguments regarding the effectiveness of increase in agricultural income to income disparity reduction, the research findings 86 support that the income sourced from the improvement in agricultural productivity can significantly improve the income levels of households in poor provinces in Vietnam It is also recommended that in order to facilitate the shift in the income structure of Vietnam from agriculture reliance to non-agriculture reliance economy, the Vietnamese Government should develop the policies to enhance the industries and service sectors in Vietnam These policies can improve the income sources from wages and other sources in both rich and poor provinces in Vietnam The Government should issue social protection policies to the citizens especially to the working people In order to this, the Government should (i) Provide information and encourage workers to notice on any measures taken or envisaged related to wages among the working people as well as the officials so that they can raise their awareness of the 2012 Labor Code‟s provisions; (ii) Apply necessary solutions to enforce Article 91 of the Labor Code 2012 so that the minimum wage as well as the minimum living standards of workers and their families are assured; (iii) Make sure all companies to pay increased wages in line with government legislation, to encourage worker representation in decision making, and to build freedom in company policy; (iv) Commit to promote accountability of trade unions and Corporate Social Responsibility (CSR) 5.3 Limitations It is acknowledged by the researcher that there are some limitations inherent in the current study There are some measurement errors presented in the calculations of incomes sourced from agriculture incomes or self-employment incomes (McCaig et al., 2015) which leads to the concerns of research validity and reliability The CPI deflators by space could be used instead of CIP yearly This limitation is significantly 87 meaningful because in this current research income from these sources presents a high portion of the national and provincial income The measurement errors can potentially devalue the effects of other sources in this study Moreover, the given period of study is only conducted with the data during 2008-2016 due to the limited access to the data in the most recent year 2017 and 2018 It can devalue the significance and contributions of this current study 5.4 Suggestions for the further studies It is identified that sources of income are of the most powerful influencing factors for income inequality in Vietnam This current study has looked into the distribution of income sources at the provincial level in Vietnam However, the influencing factors to income sources and distribution are not thoroughly investigated Therefore, it is recommended that the scholars can explore 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