A Linkage between Firm Agglomeration and Poverty Reduction First evidence in Vietnam

In this paper, we examine the linkage between the firm agglomeration and welfare of local households in Vietnam. We measured the firm agglomeration by per capita firm outputs at the district level, and household welfare by per capita income, expenditure and poverty. We find that the firm agglomeration helps households move from the informal sector to the formal sector. As a result, there is a positive effect of the firm agglomeration on per capita income, per capita expenditure, and poverty reduction, albeit at a small and time-decreasing magnitude. The effect of the firm agglomeration on per capita expenditure tends to be higher for households with male, younger and more educated heads than households with female, older and less educated heads. Households who live in rural areas and do not have crop land are more likely to benefit from the firm agglomeration than those living in urban areas and having cropland.