Exporting Out of Poverty: Provincial Poverty in Vietnam and U.S. Market Access

Can a small, poor country reduce poverty by gaining increased market access to a large, rich country? The 2001 U.S.-Vietnam Bilateral Trade Agreement provides an excellent opportunity to examine this question as, unlike other bilateral trade agreements, the U.S. tariff cuts were not influenced by Vietnamese industries. Between 2002 and 2004, provinces that were more exposed to the U.S. tariff cuts experienced faster decreases in poverty. An increase of one standard deviation in provincial exposure leads to a reduction in the poverty headcount ratio of approximately 11 to 14 percent, but this effect diminishes the further the province is from a major seaport. Three labour market channels from the trade agreement to poverty alleviation are subsequently explored. Provinces that were more exposed to the tariff cuts experienced (1) increases in provincial wage premiums for low-skilled workers, (2) faster movement into wage and salaried jobs for low-skilled workers, and (3) more rapid job growth in formal enterprises