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Education and Poverty in Vietnam: a Computable General Equilibrium Analysis

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  • Marie-Hélène Cloutier
  • John Cockburn
  • Bernard Decaluwé

Abstract

Education is often promoted as the solution to poverty in the developing world. Yet, fiscal discipline has led to reductions in public spending on education. We examine the poverty impacts of a cut in public subsidies to higher education, accompanied by corresponding tax cuts, in a general equilibrium framework applied to Vietnam. This policy is shown to have strong and complex impacts through various channels: a direct increase in the private costs of higher education, a reduction in education investments, a shift in the economy's skills mix in favor of unskilled workers, a rise in the wage premium for skilled workers, education and consumer price changes, etc. When all of these contrasting impacts are taken into account, we find that a higher education subsidy cut reduces welfare and increases poverty in Vietnam. While rural and agricultural households would benefit from this reform, urban and non-agricultural households would lose out.

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Bibliographic Info

Paper provided by CIRPEE in its series Cahiers de recherche with number 0804.

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Date of creation: 2008
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Handle: RePEc:lvl:lacicr:0804

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Keywords: Computable general equilibrium model; public expenditures; education; Vietnam; welfare; poverty;

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References

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Cited by:
  1. Stefan Boeters & Luc Savard, 2012. "The Labour Market in CGE Models," CPB Discussion Paper 201, CPB Netherlands Bureau for Economic Policy Analysis.
  2. Boeters, Stefan & Savard, Luc, 2013. "The Labor Market in Computable General Equilibrium Models," Handbook of Computable General Equilibrium Modeling, Elsevier.
  3. Lofgren, Hans & Cicowiez, Martin & Diaz-Bonilla, Carolina, 2013. "MAMS – A Computable General Equilibrium Model for Developing Country Strategy Analysis," Handbook of Computable General Equilibrium Modeling, Elsevier.

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