The Impact of Public Transfers on Poverty and Inequality: Evidence from rural Vietnam

Nguyen, Cuong and Van den Berg, Marrit (2009): The Impact of Public Transfers on Poverty and Inequality: Evidence from rural Vietnam.

Abstract

Vietnam’s extensive social security system is claimed to have played a key role in the extraordinary poverty decline over the past decades. This claim is, however, not substantiated by empirical evidence. In this study, we investigate how well contributory pensions and social allowances reached the poor and to which extent these transfers affected poverty and inequality in the early 2000s. Using fixed-effect regression to avoid endogeneity bias and allowing for different effects of different types of transfers, we find that the impact of these transfers on poverty and inequality was low, due to low coverage of poor and relatively low amounts transferred to the poor. Contrary to studies for other countries, our estimates suggest that public transfers did not crowd out private transfers nor did they result in a decrease in work effort. We do find weak evidence for multiplier effects for social transfers, but not for pensions.

• Item Type: MPRA Paper
• Language: English
• Keywords: Pensions, social transfers, poverty, inequality, household welfare, Vietnam.
• Subjects: H - Public Economics > H5 - National Government Expenditures and Related Policies > H55 - Social Security and Public Pensions; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I32 - Measurement and Analysis of Poverty

References

Barrientos Armando and Jocelyn DeJong (2006), “Reducing Child Poverty with Cash Transfers: A Sure Thing?”, Development Policy Review, 2006, 24(5): 537–552.

Carter, M. R. and C. B. Barrett (2006). The Economics of Poverty Traps and Persistent Poverty: An Asset-Based Approach, Journal of Development Studies 42(2), 178-199.

Conway, T. and A. Norton (2002). Nets, Ropes, Ladders and Trampolines: The Place of Social Protection within Current Debates on Poverty Reduction, Development Policy Review 20(5), 533-540.

Devereux, S. (2002). Can Social Safety Nets Reduce Chronic Poverty?, Development Policy Review 20(5), 657-675.

Dreze, J. (2005), “Employment Guarantee Act: Promise and Reality”, Paper for the International Conference on Employment and Income Security in India, New Delhi, 6-8 april, convened by Institute of Human Development.

Evans Martin, Ian Gough, Susan Harkness, Andrew McKay, Huyen Dao Thanh and Ngoc Do Le Thu (2006), “How Progressive is Social Security in Viet Nam?”, Report of UNDP Vietnam, Nov 2006.

Farrington John and Rachel Slater (2006), “Introduction: Cash Transfers: Panacea for Poverty Reduction or Money Down the Drain?”, Development Policy Review, 2006, 24(5): 499–511

Foster, James., J. Greer, E. Thorbecke (1984), “A Class of Decomposable Poverty Measures”, Econometrica 52, 761-765.

Giang Thanh Long (2004), “The Pension Scheme In Vietnam: Current Status and Challenges in an Aging Society”, Vietnam Development Forum, 2004.

Government of Vietnam (1993a), “The Government Decree 43-CP dated June 22nd, 1993 on Temporary Regulations of Social Insurance Schemes”.

Government of Vietnam (1993b), “The Government Decree Number 27/1993/ND-CP on Regulation of Pension and Social Allowances dated 23/5/1993”.

Government of Vietnam (1995), “The Government Decree N012/CP dated January 26th, 1995 on Regulations of New Social Insurance Scheme”.

Government of Vietnam (1998), “The Government Decree Number 93/1998/ND-CP on Amending and Supplementing Provisions of Social Insurance Regulations, Issued in Attachment to the Government Decree No. 121/CP dated 26/1/1995”.

Government of Vietnam (2003), “The Government Decree Number 03/2003/ND-CP on Adjustment of Pensions, Social Allowances, and Renewal of Pension Management dated 15/1/2003”

Jensen, R. T. (2004). Do Private Transfers `Displace' the Benefits of Public Transfers? Evidence from South Africa, Journal of Public Economics 88(1-2), 89-112.

Lloyd-Sherlock, P. (2006). Simple Transfers, Complex Outcomes: The Impacts of Pensions on Poor Households in Brazil, Development and Change 37(5), 969-995.

Maitra, P. and R. Ray (2003). The Effect of Transfers on Household Expenditure Patterns and Poverty in South Africa, Journal of Development Economics 71(1), 23-49

Morley, Samuel and Cody, David (2003), “From Social Assistance to Social Development: Targeted Education Subsidies in Developing Countries”, Centre for Global Development and IFPRI.

Perkins, Dwiggt H., Steven Radelet, Donald R. Snodgrass, Malcolm Gillis, and Michael Roemer (2001), Economics of Development, W.W. Norton & Company, Inc.

Sadoulet Elisabeth, Alain De Janvry, Benjamin Davis (2001), “Cash Transfer Programs with Income Multipliers: PROCAMPO in Mexico”, World Development, Vol 29, no. 6: 1043-1056.

Sahn E. David and Harold Alderman (1996) “The Effect of Food Subsidies on Labor Suppy in Sri Lanka”, Economic Development and Cultural Change, Vol. 45 No.1, pp 125-145.

Van de Walle Dominique (2002), “The Static and Dynamic Incidence of Vietnam’s Public Safety Net”, Policy Research Working Paper Series, No. 2791, The World Bank, Washington D.C.