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Trade reforms and welfare : an ex-post decomposition of income in Vietnam

  • Isik-Dikmelik, Aylin
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    This paper analyzes the impact of trade reforms on household welfare. In particular, it studies the importance of each of the links that together constitute the impact using data from the Vietnamese experience in the 1990s. The implementation of trade reforms in the 1990s, most noteworthy of which was the liberalization of rice, resulted in substantial improvement in welfare as evidenced by the drastic decline in poverty. Using analytical and empirical methods, the author examines the role of each channel (direct versus indirect) in this improvement for different groups of households. Results indicate that the growth has been broad based and pro-poor. Poorer households experienced more growth for each and every group analyzed. And contrary to the standard literature, net buyer households had more growth compared with net sellers, emphasizing the importance of indirect links. Decomposition of the growth shows that for rural households, both the direct effect and the multiplier effect drive growth while the multiplier effect was key in urban areas. The importance of the secondary effects underscores the need for a broader model to estimate the impact of trade reforms fully.

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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4049.

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    Date of creation: 01 Nov 2006
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    Handle: RePEc:wbk:wbrwps:4049
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    1. Porto, Guido G., 2003. "Trade reforms, market access, and poverty in Argentina," Policy Research Working Paper Series 3135, The World Bank.
    2. L. Alan Winters, 2002. "Trade Liberalisation and Poverty: What are the Links?," The World Economy, Wiley Blackwell, vol. 25(9), pages 1339-1367, 09.
    3. Christopher B. Barrett & Paul A. Dorosh, 1996. "Farmers' Welfare and Changing Food Prices: Nonparametric Evidence from Rice in Madagascar," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(3), pages 656-669.
    4. Nicita, Alessandro, 2004. "Who benefited from trade liberalization in Mexico? Measuring the effects on household welfare," Policy Research Working Paper Series 3265, The World Bank.
    5. Mellor, John W, 1978. "Food Price Policy and Income Distribution in Low-Income Countries," Economic Development and Cultural Change, University of Chicago Press, vol. 27(1), pages 1-26, October.
    6. Van der Walle, Dominique & Cratty, Dorothyjean, 2003. "Is the emerging nonfarm market economy the route out of poverty in Vietnam?," Policy Research Working Paper Series 2950, The World Bank.
    7. Dwayne Benjamin & Loren Brandt, 2002. "Agriculture and Income Distribution in Rural Vietnam under Economic Reforms: A Tale of Two Regions," Working Papers benjamin-02-01, University of Toronto, Department of Economics.
    8. Porto, Guido G., 2005. "Estimating household responses to trade reforms : net consumers and net producers in rural Mexico," Policy Research Working Paper Series 3695, The World Bank.
    9. Niimi, Yoko & Vasudeva Dutta, Puja, 2007. "Trade Liberalisation and Poverty Dynamics in Vietnam," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 22, pages 819-851.
    10. Julie Litchfield & Neil McCulloch & L. Alan Winters, 2003. "Agricultural Trade Liberalization and Poverty Dynamics in Three Developing Countries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(5), pages 1285-1291.
    11. Dercon, Stefan, 2006. "Economic reform, growth and the poor: Evidence from rural Ethiopia," Journal of Development Economics, Elsevier, vol. 81(1), pages 1-24, October.
    12. Deaton, Angus, 1989. "Rice Prices and Income Distribution in Thailand: A Non-parametric Analysis," Economic Journal, Royal Economic Society, vol. 99(395), pages 1-37, Supplemen.
    13. Budd, John W, 1993. "Changing Food Prices and Rural Welfare: A Nonparametric Examination of the Cote d'Ivoire," Economic Development and Cultural Change, University of Chicago Press, vol. 41(3), pages 587-603, April.
    14. Minot, Nicholas & Goletti, Francesco, 2000. "Rice market liberalization and poverty in Viet Nam:," Research reports 114, International Food Policy Research Institute (IFPRI).
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