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Urban and Rural Dimensions of Income Inequality in Vietnam

This study analyzes urban and rural inequalities in Vietnam by applying two techniques of inequality decomposition by population groups and income sources based on two data sets from the nationwide household surveys in 2002 and 2004. It is found that within-sector inequalities in income distribution are substantially higher than that in expenditure distribution because expenditure level is more dependent on location characteristics of a household, while the determinants of income level seems to stay in other characteristics such as education and occupations of household members. Income inequality within the urban sector is higher than that in the rural sector because urban income mainly comes from wage employment and non-farm self-employment, which are more unequal than agricultural income. Interestingly, wage employment appears to be an equalizing income source in both urban and rural areas. Agricultural income is undeniably an inequality-equalizing source. Therefore, much of income inequality stays in the distribution of sources other than wage and agriculture. Based on the review of current policies related to income distribution and decomposition analysis, the paper suggests that income diversification, development of private sector, encouraging rural-urban migration and trade liberalization would be appropriate for increasing income level while restraining increasing inequality.

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File URL: http://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2008_04.pdf
File Function: First version, 2008
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Paper provided by Research Institute, International University of Japan in its series Working Papers with number EMS_2008_04.

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Length: 41 pages
Date of creation: Apr 2008
Handle: RePEc:iuj:wpaper:ems_2008_04
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  1. Christos Papatheodorou, 1998. "Inequality in Greece: an analysis by income source," LSE Research Online Documents on Economics 6594, London School of Economics and Political Science, LSE Library.
  2. Dennis Tao Yang, 1999. "Urban-Biased Policies and Rising Income Inequality in China," American Economic Review, American Economic Association, vol. 89(2), pages 306-310, May.
  3. Mishra, Padmaja & Parikh, Ashok, 1992. "Household Consumer Expenditure Inequalities in India: A Decomposition Analysis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 38(2), pages 225-236, June.
  4. Dennis Tao Yang & Hao Zhou, 1999. "Rural-urban disparity and sectoral labour allocation in China," Journal of Development Studies, Taylor & Francis Journals, vol. 35(3), pages 105-133.
  5. Minot, Nicholas & Epprecht, Michael & Anh, Tran Thi Tram & Trung, Le Quang, 2006. "Income diversification and poverty in the Northern Uplands of Vietnam:," Research reports 145, International Food Policy Research Institute (IFPRI).
  6. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-591, September.
  7. Takahiro AKITA & Rizal Affandi LUKMAN & Yukino YAMADA, 1999. "Inequality In The Distribution Of Household Expenditures In Indonesia: A Theil Decomposition Analysis," The Developing Economies, Institute of Developing Economies, vol. 37(2), pages 197-221, 06.
  8. Fritzen, Scott, 2002. "Growth, inequality and the future of poverty reduction in Vietnam," Journal of Asian Economics, Elsevier, vol. 13(5), pages 635-657.
  9. Tarp Jensen, Henning & Tarp, Finn, 2004. "Trade Liberalization and Spatial Inequality: A Methodological Innovation in Vietnamese Perspective," WIDER Working Paper Series 035, World Institute for Development Economic Research (UNU-WIDER).
  10. Graham Pyatt & Chau-nan Chen & John Fei, 1980. "The Distribution of Income by Factor Components," The Quarterly Journal of Economics, Oxford University Press, vol. 95(3), pages 451-473.
  11. Nguyen, Binh T. & Albrecht, James W. & Vroman, Susan B. & Westbrook, M. Daniel, 2007. "A quantile regression decomposition of urban-rural inequality in Vietnam," Journal of Development Economics, Elsevier, vol. 83(2), pages 466-490, July.
  12. Chan, Nguyen & Dung, Tran Kim & Ghosh, Madanmohan & Whalley, John, 2005. "Adjustment costs in labour markets and the distributional effects of trade liberalization: Analytics and calculations for Vietnam," Journal of Policy Modeling, Elsevier, vol. 27(9), pages 1009-1024, December.
  13. Henning Tarp Jensen & Finn Tarp, 2005. "Trade Liberalization and Spatial Inequality: a Methodological Innovation in a Vietnamese Perspective," Review of Development Economics, Wiley Blackwell, vol. 9(1), pages 69-86, 02.
  14. Anthony Shorrocks & Guanghua Wan, 2005. "Spatial decomposition of inequality," Journal of Economic Geography, Oxford University Press, vol. 5(1), pages 59-81, January.
  15. Balisacan, Arsenio M. & Fuwa, Nobuhiko, 2004. "Changes in Spatial Income Inequality in the Philippines: An Exploratory Analysis," WIDER Working Paper Series 034, World Institute for Development Economic Research (UNU-WIDER).
  16. Minot, Nicholas & Baulch, Bob & Epperecht, Michael, 2006. "Poverty and inequality in Vietnam: spatial patterns and geographic determinants," Research reports 148, International Food Policy Research Institute (IFPRI).
  17. Christos Papatheodorou, 1998. "Inequality in Greece: An Analysis by Income Source," STICERD - Distributional Analysis Research Programme Papers 39, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
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