Economic Growth and Poverty Reduction in Viet Nam

Abstract

Viet Nam’s dramatic transition and growth in the 1990s have been attributed to a series of reforms, known as doi moi, which began in the late 1980s. Economic growth at nearly 8 percent yearly appeared broad-based, thus benefiting the poor and reducing poverty from 61 percent in 1993 to 37 percent in 1998. Analysis of provincial panel data suggests that the proportionate increases in the incomes of the poorest quintile were appreciably larger than those of the top 20 or 40 percent of the population. This result is at variance with typical findings for other countries, which indicate that welfare gains from growth are smallest for the lowest quintile and rise with income group. The results for Viet Nam suggest that the faster the growth rate, the lesser becomes the role of distributive factors that directly influence the poor’s well-being. Still, these factors could contribute to reinforcing both growth and poverty reduction in the long run.