Consumption inequality between farm and non-farm households in rural Vietnam

• Published in: Journal of Asian business and economic studies 2024-09, Vol.31 (4), p.290-306
• Main Authors: Pham, Thong Le, Le, Nghiem Tan, Ho, Nhi Nhat Phuong, Le, Thanh Cong
• Format: Article
• Language: English
• Subjects: Agricultural production; Consumption; Decomposition; Developing countries; Education; Employment; Endowment; Ethnicity; Expected values; Expenditures; Farm income; Households; Inequality; Land purchases; Land use; LDCs; Per capita; Rural areas; Standard of living
• ISSN: 2515-964X; 2515-964X
• DOI: 10.1108/JABES-09-2022-0224

PurposeThis study aims to analyse the consumption inequality between farm and non-farm households in rural Vietnam, using the data from the 2016 Vietnam household living standards survey.Design/methodology/approachThe present paper applies the “recentered influence functions (RIF)” in “Oaxaca-Blinder (OB)” type decomposition as proposed by Firpo et al. (2018) to allow for the flexible distribution of the outcome variables and the non-randomness of non-farm employment that violates the classical linearity assumption.FindingsNon-farm households have significantly higher per capita consumption expenditure than farm households for the entire distribution. The gap in expenditure is large at low percentiles and narrowing with higher percentiles. At 10th percentile, the gap is estimated at 27.1%, but it is decreasing to 11.1% at 90th percentile. Most of the gaps are explained by the differences in the observed characteristics between farm and non-farm households such as ethnicity, education, income, internal transmittances and household composition. Non-farm households are endowed with more productive factors that result in higher per capita consumption expenditure.Originality/valueGaps in ethnicity and education are found to be key predictors of the inequality in consumption expenditures between farm and non-farm households, then, government policies that are aimed at increasing access to non-farm employment and education for ethnic minorities and for rural poor households are pathways to improve rural household welfare and hence reduce inequality.