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Urban-biased Policies and the Increasing Rural-Urban Expenditure Gap in Vietnam in the 1990s


  • Eric Fesselmeyer
  • Kien T. Le


There was a significant and widening rural-urban gap during the economic boom in Vietnam in the 1990s. Using an econometric decomposition, we find that differences in individual characteristics such as education, ethnicity and age are the primary explanation for this widening gap, whereas differences in the returns to these characteristics are the primary explanation for the increase in the gap at higher percentiles. We then argue that government investment policies and the manipulation of price incentives were important factors behind the gap. In particular, we argue that government policies created some benefit to urban dwellers at the expense of rural areas, lending support to Lipton's urban-bias hypothesis, which states that government, under strong political pressure from the urban population, directs resources from rural to urban areas without consideration of efficiency or equity. Copyright 2010 The Authors. Journal compilation 2010 East Asian Economic Association and Blackwell Publishing Ltd..

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  • Eric Fesselmeyer & Kien T. Le, 2010. "Urban-biased Policies and the Increasing Rural-Urban Expenditure Gap in Vietnam in the 1990s," Asian Economic Journal, East Asian Economic Association, vol. 24(2), pages 161-178, June.
  • Handle: RePEc:bla:asiaec:v:24:y:2010:i:2:p:161-178

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    References listed on IDEAS

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    Cited by:

    1. Thanh Bui & Katsushi S. Imai, 2017. "Determinants of Rural-urban Inequality in Vietnam: Detailed Decomposition Analyses Based on Unconditional Quantile Regressions," Discussion Paper Series DP2017-01, Research Institute for Economics & Business Administration, Kobe University, revised Jun 2017.

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