Determinants of poverty reduction potential of land in rural vietnam

d facilitate the process of land allocation and registration by outlining procedures and designating responsibilities, and added two new land rights, including the right to use land (including rented land) as capital for joint ventures. The revisions also set out the circumstances for allowing land related changes, and procedures for registration of changes. As might reasonably be expected, land use rights are not free of legislative requirements and constraints. As noted by the East Asia Analytical Unit (1997, p. 27) the ability to transfer, lease, exchange, mortgage or inherit land use rights “varies between different categories of land, landholders and land use rights. Transactions are subject to official approval case by case”. Land related changes that are officially required to be registered with the local authorities include: changing the land use purposes stated in the certificate, re-shaping land plots, changing the land tenure right, using land as a mortgage at banks for borrowings, altering the land use duration, and sub-leasing land. Registration can only be made after the changes are “permitted by the People’s Committee of the competent level and effected in accordance with current regulations” (Circular No. 346/1998/TT-TCDC, 1998, p. 87). Registration of land-related changes incurs a fee. Further revisions in 1999 addressed complaints about the lack of procedures for “implementation” of land use rights (for example: The World Bank in Vietnam, 1998, p. 36). Decree No 17/1999/ND-CP (1999) set out the conditions and procedures for exchange, transfer, lease, inheritance and mortgage of land use rights. The conditions and procedure for land use rights exchange appear straightforward. Exchange of land may occur if “it is convenient for production and livelihood” and “the land must be used for the right purposes and within the term set by the State when the land is assigned” (Decree No 17/1999/ND-CP,1999, p. 15). Conditions for the transfer and lease of land appear stricter, especially for wet rice land (paddy). Households (or individuals) can only transfer land use rights if they move to other places of residence to live or take up production or business activities, change to other occupations or have no capacity to work. The land use right can only be transferred to households or individuals who have the demand to use the land and have no land or a land area less than the land limit. If the transferred land is wet rice land, then the land use right can only be transferred to a household or individual “directly involved in agricultural production” (Decree No 17/1999/ND-CP, 1999, p. 16). Transfer of a land use right involves payment of a tax on the transfer by the transferor, and payment of a registration fee by the transferee. Likewise, conditions apply for the leasing of land use rights. Households can make their land use rights available for lease if the family is in poverty, if they have taken up other occupations or if they lack capacity to work the land. Generally, land is only able to be leased for 3 years, except for “particularly difficult cases as certified by the commune/ ward/township People’s Committee”, and then the lease can be up to 10 years (Decree No 17/1999/ND-CP, 1999, p. 17). Subleasing of land is allowed, but only if the lease money has been paid in advance and the duration of the lease has at least 5 years still to run. Rental and land transfer values do not reflect true market prices, but rather are determined within a pricing framework set by the Central Government, with the actual prices fixed by the provincial or municipal authorities. Land limits are not rigidly enforced in all areas – especially when there is unused land, but limits hold in the heavily populated delta areas. Although, theoretically, households cannot be transferred land use rights in excess of the land limit, provision is made for households to be able to work land in excess of the limit. Land transferred in excess of the limit must be leased from the State. Lease money is not always charged however, especially for land not considered highly productive (for example, “barren hills” in upland areas). The process of land reform in Vietnam is on going, and another revision to the Land Law has recently been passed by the National Assembly and took effect in October 2001. Considerable pressure is being exerted on the government in relation to the completion of allocation and registration of land use rights, issues related to compensation and the desirability of stable and long-term tenure (for example: Vietnam News, 2000b; Mai, 2001). There is also ongoing debate about the appropriate length of tenure, ceiling levels for land holdings and restrictions on the transfer and use of land. The process of land allocation Approximately 80 percent of the populations of some 80 million people live in rural areas and there are over 11 million household farms in Vietnam (GSO 2002). Farm sizes vary throughout the country, but they are typically small. The average size of farms in the Mekong Delta is 1.2 hectares, and this is considerably larger than average farm sizes in the Red River Delta is 0.28 hectares (GSO 2003). The allocation of land use rights is officially undertaken by the General Department for Land Administration, with certificates of title for agricultural land issued by the District People’s Councils. In practice however, the State allocates land use rights through People's Committees at the district and commune level (East Asia Analytical Unit, 1997; The World Bank in Vietnam, 1998). The October 2001 revisions to the Land Law have given local authorities more power to deal with matters such as allocation and leasing of land, and the issuing of land use right certificates. Since 1993, the process of land allocation in rural areas has been proceeding steadily, along with the necessary mapping that precedes allocation and certification, although a number of problems have arisen with the allocation of forest land (The World Bank in Vietnam, 1998, pp. 35-36): “Directive 10-1998/CT-TTg (20/2/98) claims that 60% of households with rights to 65% of agricultural land have been issued certificates of title. … Only 9.8% of forest land (of which only 1% is natural forest) has been allocated. Local authorities are having to grapple with the complex issues involved in marrying the terms of the 1993 Land Law with customary land-use patterns and rights. The scope for disputes is large since customary owners may vigorously contest the allocation of individual rights.” The allocation process varies between districts, although equity between households was a primary consideration in the land allocation, with consideration being given both to land quality and the number of people, or more specifically labors equivalents, in a household. Consequently, the amount of land allocated varied between households and this land was typically split into a number of plots of varying land quality. The World Bank in Vietnam (1998, p. 10) says “on average, farms in the Red River Delta comprise eight or nine noncontiguous plots often no largerthan 200 to 500 square meters each”. Likewise, Chung (1994, p. 4) reports that in the Red River Delta “households held three to ten plots of farm land scattered in different locations”. In mountainous areas, the number of plots allocated to households tended to be even greater, as the land quality was extremely variable. In the South of Vietnam, the degree of land fragmentation is not so pronounced, with many farmers in the Mekong Delta having only one plot. Be (2000b) suggests that in the South, farmers were “less concerned” with equitable distribution and negotiations took place at District Committee level to “balance” the size of allocations giving consideration to the varying quality of land, and farmers were then allocated larger consolidated parcels. Land allocation to households in the south of Vietnam was also more likely to be based on earlier allocations made during the land reforms of 1975. Typically, not all land within a commune was allocated. A proportion of land was kept (usually between 5 and 10 percent) “to defray public expenses or readjust land allocation periodically to demographic changes such as family members returning from military service” (Chung, 1994, p.4). Other land such as ponds, lakes and garden areas which are difficult to divide, were often also left unallocated, and then assigned to individual households on the basis of competitive bidding. Land use in Vietnam Under the Vietnamese Constitution, land is the property of the people as a whole and the State administers it on their behalf. Since land is 'owned' by the people as a whole, it is not possible for individuals (or corporations) to own land, although they (and foreigners) can own and transfer structures such as houses built on land. However, Vietnamese (but not foreign) individuals, households and organizations can hold and transfer rights to use land. Recent changes to the Land Law made in October 2001 will make it possible for some categories of overseas Vietnamese (Viet Kieu) to hold land use rights. Vietnam has a large population and limited land and, like other countries with high population to land ratio, the value of land is high, and use rights are very important. These rights are crucial to improved private sector development but there are ideological issues that remain important (Fforde, 1995; East Asia Analytical Unit, 1997; AusAID, 2001). Fforde (1995) talks of the difference between Western and Vietnamese understanding of the concepts of public and private land. ‘Private’ land has always been “land over which the local community had considerable residual rights” (p. 93). Hence Fforde (1995, p. 93) argues that “In practice, it is very hard to imagine that various implications of a western concept of private property in land would be accepted – for example, that rice land offered as collateral on a loan by a family should be taken upon foreclosure without the village’s permission.” Other ideological issues relate to the use of land. Land use should be complete (day du), that is, all land should be used; and reasonable, that is, the land should be farmed efficiently with appropriate crops and rotations and attention paid to maintaining the fertility of the land (Tien, 2000b). In practice, this is determined by restrictions on land use that are specified on the certificate of land use rights. There are conflicting views about to what extent the use of land should be the province of the individual or controlled by the State. However, the centrality of state land management to government policies is still paramount (AusAID, 2001). For example, the Hanoi People’s Committee confiscated over 50 hectares of “illegally used” land in late 2001 and early 2002 (Vietnam News, 2002a). These concerns on the use of land are linked closely to issues of rice policy and food security. Shortages of food were commonplace in the mid- 1980s and that is not so long ago. In some districts control over production in still exerted by the State, particularly with regard to rice production (The World Bank in Vietnam, 1998). Production targets are set at a local level in response to government directives and individual households may have to grow crops as directed. Some 4 million hectares of land in Vietnam is still ‘required’ to grow rice, although this represents a decrease of 0.2 million hectares on land previously set aside for rice production (Vietnam News, 2000c). Table 1 - Major annual crops grown in Vietnam, 1995-2000 Year Area of each crop as a percentage of total area under all annual crops Food crops Annual industrial crops Rice Maize Sweet potato Cassava Sugarcane Peanut Soy-bean 1995 73.3 6.0 3.3 3.0 2.4 2.8 1.3 1996 73.8 6.5 3.2 2.9 2.5 2.8 1.2 1997 73.3 6.8 2.8 2.6 2.7 2.6 1.1 1998 73.5 6.5 2.5 2.4 2.8 2.7 1.3 1999 73.1 6.6 2.6 2.2 3.3 2.4 1.2 2000a 73.3 6.8 2.5 2.2 2.9 2.3 1.2 Note: a - Figures for 2000 are preliminary Source: Adapted from data reported by GSO (2001). Percentage land areas planted to some major annual food and industrial crops are given in Table 1. The percentage area planted to rice appears quite stable and kept at quite high ratio for long time, while there has been some increase in the percentage area planted to sugarcane and maize and some decrease in the percentage area planted to sweet potato and cassava (both comparatively low value food crops). POVERTY IN VIETNAM Overall Poverty in Vietnam Table 2 shows that Doi Moi also resulted in an impressive reduction of poverty in Vietnam. It is estimated that before 1986 the national poverty in Vietnam ranged between 74 and 78% (Dollar and Litvack 1998). No matter what poverty measure is selected, all figures indicate that poverty incidence has more than halved in only one decade after the implementation of economic reforms. Indicators in the Table 2 also show that the percentage of the population living below the poverty line declined from over 70 per cent at the end of 1980s to 58 percent in 1993, reducing to 37 per cent in 1998, and kept at 29 per cent in 2002. The proportion of the food-poor decreased from 25 per cent in 1993 to 15 per cent in 1998 and 11 per cent in 2002. Table 2: Indicators of poverty in Vietnam 1990-2002 INDICATORS ON POVERTY AND INEQUALITY (IN %) 1990 1993 1998 2002 National poverty rate (GSO) 70 58.1 37.4 28.9 Food poverty rate (GSO) Na 24.9 15.0 10.9 Poverty gap (GSO) Na 18.5 9.5 6.9 Poverty gap squared (GSO) Na 8.3 3.6 2.6 Sources: Worldbank (2003), Steering Committee of CPRGS (2003) and MPI Poverty line of GSO/World Bank Concept = 2100 kl/person/day = 1,916 thousands VND/person/year (price in 2002) Dimensions of poverty in Vietnam As already presented above, Vietnam’s economic growth over the past decades was associated with a remarkably strong overall reduction of poverty incidences. However, the household survey data also point to significant changes in the rates of poverty reduction once they are disaggregated into the most relevant dimensions. I deliver a more detail information of the spatial dimensions of poverty (see Table 3). Table 3: Spatial dimensions of poverty and inequality in Vietnam POVERTY RATES (HEADCOUNT INDEX %) SHARE OF POPULATION (IN %) YEARS 1993 1998 2002 1993 1998 2002 National dimensions 58. 1 37.4 28.9 100 100 100 Regional dimension Northern Uplands 81.5 64.2 43.9 15.6 18 15 + North East 86.1 62 38.4 - - - - 12 + North West 81.0 73.4 68.0 - - - - 3 Red River Delta 62.7 29.3 22.4 21.6 20 22 North Central Coast 74.5 48.1 43.9 12.8 14 13 South Central Coast 47.2 34.5 25.2 12.6 11 8 Central Highlands 70.0 52.4 51.8 3.2 4 6 South East 37.0 12.2 10.6 12.6 13 15 Mekong Delta 47.1 36.9 23.4 22.4 21 21 Area dimension Urban areas 25.1 9.2 6.6 19.9 20.9 23.23 Rural areas 66.4 45.5 35.6 80.1 79.1 76.77 Source: World bank (2003) and GSO. Regions are defined as in 2002. As in the table 3 reveals, some regions like South East and Mekong Delta and South Central Coast had lower incidences of poverty than the national average throughout all periods. Red River Delta joined this group in the second phase of growth. North Central Coast, North West and North East and Central Highlands in the south are characterized by incidences of poverty higher than the national average in all periods. Regional poverty incidences are closely related to area poverty rates, since the regions with disproportional reduction in poverty are those with a higher share of urban areas, whereas Central Highlands and North West are mainly rural regions. The figures show that poverty is still considerable higher among rural households where are the overwhelming majority in Vietnam. Table 4: Ethnic and gender dimensions of poverty in Vietnam POVERTY RATES (HEADCOUNT INDEX IN %) SHARE OF POPULATION (IN %) YEARS 1993 1998 2002 1993 1998 2002 Ethnic dimension Kinh and Chinese 53.9 31.1 23.1 86.9 85.3 84.2 Ethnic minorities 86.4 75.2 69.3 13.1 14.7 15.8 Gender dimension Male-headed households 61 40 31 77.5 78.4 77.58 Female-headed households 48 28 20 22.5 21.6 22.42 Source: Worldbank (2003), Glewwe et al. (2002) Table 4 shows the ethnic and gender dimensions of poverty in Vietnam. Both are strongly related to the spatial dimension. Vietnam’s ethnic minorities live in the less populated rural regions and account for the increasing share of these regions in the contribution to overall poverty. Across all regions the data reveal that ethnic minorities did not only enjoy a much smaller reduction of absolute poverty. The gender dimension of Vietnam’s poverty profile with female-headed households showing less poverty then male-headed households. However, the gender of the household head is only a very rough indicator of differences in well being between men and women. Other indicators will be analyzed below. Female-headed households are usually smaller, are more typical in urban areas and often receive remittances from husbands working elsewhere in the country or overseas (UNDP 2003). Rural female headed households, however, are usually very poor or face a very high vulnerability of falling into poverty (Man Loi 1996, Centre for International Development 2002). Table 5: Socio-characteristics of Vietnam’s poverty profile HEADCOUNT INDEX (IN %) SHARE OF POPULATION %) 1993 1998 2002 1993 1998 2002 1. National Poverty 58.1 37.4 28.9 100.0 100.0 100.0 2. Household size Small (≤ 3 members) 45.95 16.95 16.69 12.22 12.14 14.83 Medium (3-6 members) 56.86 30.80 25.46 36.36 44.10 50.25 Large (≥ 6 members) 64.72 49.66 41.62 51.43 43.76 34.93 3. Number of children Number of children ≤ 2 55.92 34.33 24.80 48.69 56.60 57.07 Number of children 2-5 61.57 39.92 33.73 34.81 32.62 32.36 Number of children ≥ 5 66.11 45.64 44.75 16.50 10.79 10.58 4. Occupation of the household head (*) White collar 23.6 9.9 29.27 4.6 6.6 6.18 Sales 27.7 13.0 32.84 8.1 9.5 14.80 Agriculture 69.0 48.2 26.85 64.7 61.0 51.73 Production 45.9 26.0 38.55 10.9 11.5 14.20 Other/no work 44.4 27.4 28.83 11.7 11.3 13.10 5. Education of the household head No schooling 62.6 55.0 37.01 36.1 35.5 31.58 Primary 56.7 42.2 32.24 24.4 23.1 24.52 Low secondary 64.0 38.0 29.32 23.4 22.4 26.47 Upper secondary 44.5 25.1 18.46 4.7 5.2 8.39 Technical worker, vocational school or university degree 39.2 14.2 9.97 7.9 13.8 9.04 Source: Worldbank (2003), Glewwe et al. (2002) 2.3 Summary of characteristics of poverty in Vietnam - The poor in Viet Nam are less educated and less skilled; has more children but less access to l and and credit; spends less on education and has less health insurance coverage; lacks opportunities to earn income and is more vulnerable e to external shocks and risks (Vu Quoc Huy, 2002). - Poverty incidence was more prevalent and more persistent among ethnic minorities. Ethnic minority households are larger and have more children than the average. The educational attainment of household heads and spouses is lower. Endowments in terms of housing and other assets are also below average. The compounded effect of all these characteristics is such that minority households are substantially poorer. The share of ethnic minorities among the poor is al so increasing steadily, from 20 per cent in 1993 to more than 30 per cent by 2002. The upward trend is even stronger if food poverty is considered instead. The share of ethnic minorities among the food-poor increased from less than 30 percent in 1993 to almost 53 percent in 2002. - The poor generally have low levels of educational attainment. Although poverty incidence has dropped for every level of educational attainment over the 1990s, the poor have relatively low levels of educational attainment. The highest incidence of poverty (40 percent) is for those w ho have not completed primary school. In 2002, the poor had the lowest literacy rate (less than 90 percent) compared with the non-poor. About one fourth of the poor have not finished primary school. The highest education attainment for another two thirds of them is primary and lower secondary school. Less than 2 percent of them have education higher than upper secondary level (table 5). - The overwhelming majority of the poor (92 percent) live in rural areas. Poverty is al so very much associated with ethnic minorities living in isolated and mountainous areas such as the Northern Uplands and the Central Highlands. CHAPTER IV ESTIMATION RESULTS OF HOUSEHOLD WELFARE This chapter will use econometric models to explore determinants of the household welfare in rural Vietnam. This chapter has three sections, First section introduces data, second is to introduces variables and the third is results of econometric models. The econometrics model in the household welfare index equation. DATA This study is based on Vietnam Living Standards Survey (VLSS) carried out by General Statistic Office (GSO) in 2002. Survey sample consists of 29532 households with about 132000 people in Vietnam. The survey provides detailed information about employment, income, level of education, and demographic characteristics of household members. The survey also contains valuable information of household such as other income and total land area. This analysis is confined to household possessing annual crop land as production in rural area nationwide. The final data sample has 9523 household; in 8 regions described as below (table 5) Table 5: Number of household by region Region Number of household Percentage Cumulative Red River Delta 1,786 18.75 18.75 Northeast 1,719 18.05 36.81 Northwest 280 2.94 39.75 North Central Coast 914 9.6 49.34 South Central Coast 910 9.56 58.9 Central Highlands 512 5.38 64.28 Southeast 1,474 15.48 79.75 Mekong Delta 1,928 20.25 100 Total 9523 100 100 Source: Author's calculations based on VLSS 2002 In which 8,254 households or 86.67% belong to Kinh or Chinese group, the rest is 1,269 households in minority ethnic groups. II. DESCRIPTION OF VARIABLES 1. Dependent variable Welfare index is defined as income of household in thousand Vietnam Dong per year. Income would include value in cash and in kind payment of Income from wages, salaries of members, Income from renting / leasing agricultural, forestry and aquaculture area; living land and housing, value of scholarship, award. The income also including all from agricultural production activities after deducting expenditures in those agricultural production activities and income from non-farm, non-sivylcuture, non-aquaculture businesses; processing … also included. .All income are adjusted to regionally Consumers’ Price Index (CPI), which obtained from the GSO to receive real wages. (See Appendix Table-1 provides a detailed description of the variables used in my analysis) 2. Explanatory variables Land area: I focus on allocated annual agricultural managed and/or used by household. Allocated annual agricultural land is importance in production and total area. It can be irrigated or non-irrigated, (annual agricultural land is for annual crops such as rice or groundnuts.) Within annual crop-land, the survey identifies five land types: Allocated land: This is the land allocated to households by the cooperative or productive group under Resolution 10; this accounts for the bulk of the North's crop land; Long-term use land: Predominant in the South, this differs from allocated land only in that the farmer owes no contracted output (in addition to obligatory taxes for all allocated land) to the cooperative or productive group that allocated the land; Auctioned land: This refers to a part of the cooperatives' land reserved for bidding by households, with a three to five year tenure depending on the region; Private land: This consists of land inherited and used by households as a garden area, as well as an area equal to 5% of the commune’s agricultural land that has been handed to households for their private use; this land requires no payment; and Sharecropped or rented land. Annual agricultural land can be irrigated or non-irrigated. Unfortunately in VLSS 2002, the information of irrigated and non-irrigated land is not available. We only be provided both in one kind as annual crop land, so that I treat this unique kind as land variable in the thesis. It is expected that larger annual crop land will have higher returns, and its unit is ha. Education Education variable is represented by binary variables measuring the completion of some or all of the indicated levels of education. Education is classified into 5 levels that are below primary, primary, lower secondary, upper secondary, and those who have education at level of vocational/ technical, and college and higher degree. Below primary, which are included no education, is treated as the reference group. It is expected that higher levels of education will have bigger returns. Labor force (number of individuals) Labor force used in the regression is number of individuals excluding household head in the household that those whose age ranging from 15 to 60 year old for both male and female. Male labor force is in 5 subgroups based on their education attainment, from no education to those who have education at level of vocational/ technical, and college and higher degree. Below primary, which are included no education. It is the same division to female labor force. In my estimation, I include 10 independent variables consists of 5 subgroups for male at five level of education attainments and the same 5 subgroups for female . The results release only 2 subgroups that they have statistically significant, so the rest will be dropped. Geographical characteristics Vietnam is characterized by marked geographical variation, some of which reflects different historical evolutions. The country is commonly divided into 8 regions that are relatively homogeneous. I estimate my regressions nationally as well as for the 8 regions for which there was sufficient data, namely the Northwest Uplands, Northeast Upland, the Red River, North Coast, South Central Coast, Central Highlands, Southeast and Mekong Delta. The result shows variable of Central Highland is non-significant and so I drop it out. Social subsidy According to data in VLSS 2002, we have non-labor income of household, which is available for income effect on household desire to work. Non-labor income of household is corrected for cross-region price index. It includes remittance and value of in kind presents from overseas; domestic remittance and value of in-kind presents; pension, sickness and one-time job loss allowance; social insurance allowance; other income from social insurance; interest of savings, shares, coupon, loans; income from workshop, machinery, assets, tool...leasing; others (lottery, charity and support from other organizations…). Its unit is in thousand Vietnam Dong per year. In addition, this study introduces some variables in the welfare household index including ethnicity, local characteristics and income of male and female from self-employed or none. ESTIMATION RESULTS: The household welfare generating potential of land Table 6 presents the result of estimation from the household welfare equation. The result shows that the marginal welfare value of land is highly significant. An increase of 1 hectare will increase annually income by 2,700,000 VND. The result of increase of marginal welfare value of land is consistent with results have been reached in Ramo´n Lo´pez and Alberto Valde´s (2002); Frederico Finan, Elisabeth Sadoulet, Alain de Janvry (2002) and Dominique van de Walle and Dileni Gunewardena (2001). For a better sense of this value, I compare with the poverty line adapted by GSO/WB is 2100 kl/person/day, it is equivalent to 1,916 thousands VND/year (price in 2002) and see that the value of 2,700,000 VND/hectare/year would be a considerable. That is why we say that annual crop land would be a valuable instrument for household in the process of poverty reduction in rural. Characteristics of household head are associated with large welfare effects. As presented in the table 6 A marginal increase in the household head’s education level raises welfare by 2,498 thousand VND/year (unfortunately my estimation result does give statistically insignificant result of household head without education). Marginal welfare in term of education attainment sharply increase at higher level from 5,996 thousands if education attainment of the head at lower secondary to 8,648 thousands at higher secondary. This welfare would reach up to 14,929 thousands if the heads have education attainment from vocational program, colleague and university or higher, If compare the welfare of subgroup that the head attains only primary level with the highest subgroup we see that it is almost 6 times lower than, the gap is too large and it shows that education attainment would be significant human capital in the process of poverty reduction. There are many researches worldwide and in Vietnam has demonstrated that higher education attainment always raise income for households such as in papers reached by give higher Behrman, J.R. and Knowles, J.C. (1999); Brown, P. and Park, A. (2001); Moock, P.R, H.A Patrinos, and M. Venkatarama (2003); Glewwe, P. and Jacoby, H.G. 2004. The result presents household that lead by female raise by 1,774 thousands a year. This is consistent with the result presented in the table 4 (Ethnic and gender dimensions of poverty in Vietnam) where poverty incidence was always much lower compare to household lead by male. The value is meaningful, it is about 6.5 times higher than income raised by increase in household age. Labor force: Labor force used in the regression is number of individuals excluding household head in the household that those whose age ranging from 15 to 60 year old for both male and female. Male labor force is in 5 subgroups based on their education attainment, from no education to those who have education at level of vocational/ technical, and college and higher degree. Below primary, which are included no education. It is the same division to female labor force. In my estimation, I include 10 independent variables consists of 5 subgroups for male at five level of education attainments and the same 5 subgroups for female . The results release only 2 subgroups that they have statistically significant, so the rest will be dropped. The result shows that an additional of an adult male with no education attainment increase welfare by 1,889 thousands VND a year and increase to 1,922 thousands VND if they have primary level. This value is the same with the poverty line used by GSO/WB. There is a high cost associated with ethnicity as being minority ethnic group by 1,871 thousands VND a year. Dominique van de Walle and Dileni Gunewardena (2000) pointed out that there were larger differences in educational attainments, land assets, household size, infrastructure and other attributes between majority and minority group, above disadvantages of minority group would affect the quality of education and other infrastructure, accessibility to services and information, and off-farm income-earning opportunities. Poverty incidence of minority ethnic group is still so high (table 4). Table 6 - Estimation of the welfare household index Arg value Coefficient Standard Error t Statistic P value [95% Conf. Interval] Land assets 3944.787 2699.725 399.910 6.750 0.000 1915.815 3483.635 Social subsidy 2010.723 1.235 0.046 27.100 0.000 1.145 1.324 Head of household characteristics gender 0.846 1774.459 559.165 3.170 0.002 678.377 2870.541 age 39.638 267.554 14.045 19.050 0.000 240.023 295.085 Ethnicity 0.133 -1871.464 301.564 -6.210 0.000 -2462.593 -1280.334 0< education <6 0.229 2498.406 664.090 3.760 0.000 1196.647 3800.164 6<= education <=9 0.284 5996.175 735.970 8.150 0.000 4553.517 7438.833 9< education <=12 0.093 8648.607 792.435 10.910 0.000 7095.265 10201.950 education >12 0.184 14929.090 743.760 20.070 0.000 13471.170 16387.020 Labor force (number of individual) Male adults with education = 0 0.174 1888.898 729.769 2.590 0.010 458.394 3319.402 Male adults with 0< education <6 0.203 1921.769 770.308 2.490 0.013 411.801 3431.736 Locality characteristics Cooperative 0.276 -2500.103 249.538 -10.020 0.000 -2989.251 -2010.955 Male self-employment wage (daily) 5.630 -1.674 1.745 -0.960 0.338 -5.094 1.747 Male no self-employment wage (daily) 26.753 3.983 0.885 4.500 0.000 2.249 5.716 Female self-employment wage (daily) 0.292 -14.192 5.784 -2.450 0.014 -25.529 -2.854 Female no self-employment wage (daily) 6.403 5.088 1.471 3.460 0.001 2.205 7.971 Region Red River Delta 0.188 1947.667 553.263 3.520 0.000 863.154 3032.180 Northeast 0.181 198.0105 463.113 0.430 0.669 -709.789 1105.810 Northwest 0.029 -920.951 610.888 -1.510 0.132 -2118.423 276.521 North Central Coast 0.096 -2076.030 502.002 -4.140 0.000 -3060.060 -1091.999 South Central Coast 0.096 1877.706 565.241 3.320 0.001 769.712 2985.699 Southeast 0.155 5981.269 582.402 10.270 0.000 4839.637 7122.902 Mekong Delta 0.202 2478.22 517.121 4.790 0.000 1464.553 3491.887 Constant -4627.079 836.239 -5.530 0.000 -6266.286 -2987.872 Number of observations = 9523 F( 23, 9499) = 137.54 Prob > F = 0.0000 R-squared = 0.4781 Root MSE = 10629 Regression with robust standard errors (White's test for heteroskedasticity) Source: Author's calculations based on VLSS 2002 In my result, accessing to cooperatives decrease a high value for household, by 2,500 VND a year. This result partly explains the successful process of de-collectivization in Doi Moi, this process has brought significant performance in agricultural production and poverty reduction. However Vietnam is still maintaining the existence of cooperative, but these are facing many difficulties and low efficiency (Vietnam Cooperative Association Report 2004). Turning to returns to land, they are positive and significant for all regions except for NW and NCC. An increase in hectare annual cropland, for example, increased by 1,948 VND a year in RRD and the same in SCC. This value is quite higher in MKD by 2,478 thousands but the marginal value reach highest in SE by 5,981 thousands a year. While there is a cost in 920 and 2,076 thousands VND a year in NW and NCC respectively. There is a wide range of difference in return to land among regions since the returns to land will be sensitive to the levels of input use (e.g., labor and capital), technology and environment (e.g., irrigation) in each region, the negative returns in the NU and NCC would suggest that at least one of these components was critically unfavorable there. In fact, the average irrigation ratio of the NU has been much lower than in the RRD (Dollar and Glewwe, 1998; MARD, 2000). According to Kazushi TAKAHASHI (2004) pointed out that the different returns to land caused by the difference in the returns to human capital variables of the RRD are higher than the NU, but lower than the MKD. SUMMARY OF FINDINGS In this section, I estimate a household welfare equation to explore the relationship between land and welfare. There are two main findings. First, Agricultural land contribute positive income to household in rural. The marginal value of land would change in all 8 regions that I estimate. Second, the marginal value of land differs according to a household’s complementary assets and contextual setting. CHAPTER V CONCLUSION AND POLICY IMPLICATIONS I. CONCLUSION Access to land has for a long time been advocated as a strategy to reduce rural poverty (Warriner 1969; Thiesenheusen, 1989, Dorner, 1992). This study examines the potential of land in reducing poverty in rural Vietnam, and carefully taking into account the specific conditions under which land is used by households. In this thesis, I use parametric approaches to estimate household welfare index with data from Vietnam Living Standard Survey 2002. Household welfare equation is regressed on a set of variables, which are annual agricultural land, labor force, education attainment, region and household characteristics and dummies. Based on data from VLSS 2002, the main findings are: In general, I find that the marginal welfare value of land is quite high. An increase of 1 hectare will increase annually income by 2,700,000 VND, however there is a wide range of difference in return to land among regions. An increase in hectare annual cropland, for example, increased by 1,948 VND a year in RRD and the same in SCC. This value is quite higher in MKD by 2,478 thousands but the marginal value reach highest in SE by 5,981 thousands a year, while there is a cost in 920 and 2,076 thousands VND a year in NW and NCC respectively. Education is an important factor contributes to household welfare. a marginal increase in the household head’s education level raises welfare by 2,498 thousand VND/year if the head finished primary level and reach up to 14,929 thousands if the heads have education attainment from vocational program, colleague and university or higher. In my thesis, I also point out some other specific conditions under which land is used by household.. II. POLICY IMPLICATIONS Based on findings in my thesis, main policy implications are as follow: Poverty incidence mainly appears in rural area and land still is a major instrument for household to generate income, so the government should provide favorable conditions for peasants to assess to land. It would will greatly be supported by strengthening the implementation of land legislation, improving the quality of land use planning, developing an appropriate land use tax law, and improving the openness and transparency of the land administration system. Land reform should be closely combined with specific conditions under which land is used by households. Education would be key factor to positively effect on household welfare in rural. Higher education attainment in subgroups create higher income from land than others especially skilled level, so the government should pay more investment in education, especially in minority ethnic group. The government should consider an assistance strategy about technical and vocational training for people in rural area. These training programs have to actually improve the skills for the needs of agricultural production. III. SUGGESTION FOR FURTHER STUDY Some important variables for household welfare index could not be handled in this thesis. First, annual agricultural land should be divided into 2 kinds including non-irrigated and irrigated ones, unfortunately, this division was unavailable in VLSS 2002. Second, the effect of road infrastructure on agricultural production was also not considered. It is evident that better transport infrastructure leads to higher output and lower input prices and creates therefore incentives for higher household welfare. Lastly, health services might affect household welfare. However, its effect is difficult to assess with data of VLSS 2002. Furthermore, household welfare index used here based on household income, it is simple and vulnerable index. 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APPENDICES Table 1: Definition of variables used in regression Variables Definition Dependent variable Household welfare Total agricultural production income + Total livestock income + Total income from farm services + Total income from sylviculture + Total income from hunting down, trapping, domesticating forestry animals + Income from aquaculture + Income from non-famr, non-sivylcuture, non-aquaculture businesses; processing…. minus expenditures from these production activites. Household welfare also include from value of scholarship, award + Income from wages, salaries of members + Income from renting / leasing agricultural, forestry and aquacutural area; living land and housing and from other incoming money which is considered as income Explanatory variables Land assets Annual agricutural land, it combines both irrigated and non-irrigated as one Social subsidy Remittance and value of in-kind presents from overseas + Domestic remittance and value of in-kind presents + Pension, sickness and one-time job loss allowance + Social Insuarance allowance + Other income from social insurance + Interest of savings, shares, coupon, loans + Income from workshop, machinery, assets, tool … leasing + Others (lotery, charity and support from other organizations ..) Head of household characteristics Gender (dummy) = 0 if male, 1 if female Age (year) Education level Ethnicity (dummy) = 0 if Kinh or Hoa, =1 if not Kinh or Hoa Labor force (number of individuals) Male adults with education = 0 Male adults with 0< education <6 Male adults with 6<= education <=9 Male adults with 9< education <=12 Male adults with education >12 Female adults with education = 0 Female adults with 0< education <6 Female adults with 6<= education <=9 Female adults with 9< education <=12 Female adults with education >12 Social and institutional assets Access to agriculture cooperative (dummy) Coop = 1 if yes; otherwise = 0 Locality characteristics Male agricultrial wage (daily) Male non-agricultrial wage (daily) Male self-employed wage (daily) Female agricultrial wage (daily) Female non-agricultrial wage (daily) Female self-employed wage (daily) Region dummies =0 if Red River Delta (benchmark) =1 if Northeast =2 if Northwest =3 if North Central Coast =4 if South Central Coast =5 if Central Highlands =6 if Southeast =7 if Mekong Delta Mean characteristics of variables Obs Mean Std. Dev Min Max Household welfare 9523 18153.27 14694.26 -2154.92 223455.6 Land assets 5993 3944.787 6472.268 0 140000 Social subsidy 9523 2010.723 5679.258 0 117641.1 Head of household characteristics gender 9523 0.8461619 0.3608124 0 1 age 9523 39.63793 8.001822 17 60 Ethnicity 9523 0.1332563 0.3398694 0 1 Education = 0 9523 0.2091778 0.4067429 0 1 0< education <6 9523 0.2290245 0.4202271 0 1 6<= education <=9 9523 2840491 0.450984 0 1 9< education <=12 9523 0.0933529 0.2909417 0 1 education >12 9523 0.1843957 0.3878269 0 1 Labor force (number of individuals) Male adults with education = 0 9523 0.1739998 0.3791292 Male adults with 0< education <6 9523 0.2027722 0.4020854 Male adults with 6<= education <=9 9523 0 0 0 Male adults with 9< education <=12 9523 0 0 0 Male adults with education >12 9523 0 0 0 Female adults with education = 0 9523 0.035178 0.1842391 0 1 Female adults with 0< education <6 9523 0 0 0 Female adults with 6<= education <=9 9523 0 0 0 Female adults with 9< education <=12 9523 0 0 0 Female adults with education >12 9523 0 0 0 Locality characteristics Cooperative 9523 0.2763835 0.4472322 0 1 Male self-imployment wage 9523 5.630192 42.1485 0 1188.294 Male nonself-imployment wage 9523 26.7531 175.3239 0 4702.248 Female self-imployment wage 9523 0.2916305 9.735414 0 720.8564 Female nonself-imployment wage 9523 6.402541 98.62198 0 3895.906 Region Red River Delta 9523 0.1875459 0.3903696 0 1 Northeast 9523 0.1805103 0.3846322 0 1 Northwest 9523 0.0294025 0.1689408 0 1 North Central Coast 9523 0.0959782 0.2945768 0 1 South Central Coast 9523 0.0955581 0.2939997 0 1 Central Highlands 9523 0.0537646 0.2255644 0 1 Southeast 9523 0.1547832 0.3617168 0 1 Mekong Delta 9523 0.2024572 0.4018523 0 1