Trinity International Development Initiative
Annual Development Research Week
November 7th, 2011
The Micro-foundations of Development: an
Exploration of Access to Resources and the
Livelihoods of the Rural Poor in Vietnam
Carol Newman
Micro-foundations of Development

Understanding the development process requires that we
look at the behaviour of individuals, households and firms at
a microeconomic level

What issues can be addressed at a micro-level?


Access to basic services – health and education

Financial markets – limited access to credit, lack of facilities to
save

Ineffective institutions - poorly defined property rights

Exogenous conditions – weather, floods, drought

Intra-household distribution
Identifying the constraints and barriers to growth and
development will help inform policy makers as to how to
effectively alleviate poverty and inequality
An Exploration of Access to Resources and the
Livelihoods of the Rural Poor in Vietnam

Policy relevant research with sound academic underpinnings

Project funded by Danida, Danish Ministry of Foreign Affairs
Aid Programme and is led by Prof. Finn Tarp of Development
Economics Research Group, Department of Economics,
University of Copenhagen

Partners include the Central Institute for Economic
Management, Institute for Labour Studies and Social Affairs
and the Institute of Policy and Strategy for Agriculture and
Rural Development all based in Hanoi, Vietnam

The overall purpose of the project is to deepen our
understanding of the economic wellbeing of households in
rural Vietnam, with a particular focus on access to, and use
of, productive resources.
An Exploration of Access to Resources and the
Livelihoods of the Rural Poor in Vietnam

Vietnamese Access to Resources Household Survey

Design of survey module

Implementation of the survey

Production of research on issues of importance to partners
in Vietnam

Training and knowledge transfer to partners in Vietnam

Dissemination of research to wider Vietnamese and
international audiences
An Exploration of Access to Resources and the
Livelihoods of the Rural Poor in Vietnam
Three rounds of the survey 2006, 2008 and 2010
12 rural provinces in Vietnam
2,200 hhs, in 131 districts
and 456 communes
Carried out between June
and August
Outputs

Characteristics of the Vietnamese Rural Economy:
Evidence from a 2010 Rural Household Survey in 12
Provinces of Vietnam


Descriptive report provides an overview of key insights from the
VARHS 10 database, comparing as appropriate with VARHS 06
and 08
Topics covered:
 Agricultural production
 Distribution of land and property rights
 Household enterprises
 Rural financial markets
 Social capital
Outputs

Characteristics of the Vietnamese Rural Economy:
Evidence from a 2010 Rural Household Survey in 12
Provinces of Vietnam


Descriptive report provides an overview of key insights from the
VARHS 10 database, comparing as appropriate with VARHS 06
and 08
Topics covered:
 Agricultural production
 Distribution of land and property rights
 Household enterprises
 Rural financial markets
 Social capital
Outputs

Training courses in the microeconometric analysis of
survey data to partners in Vietnam




Household Survey Analysis, Hanoi, November 2006
How to Prepare a Descriptive Report, Hanoi, January 2009
Microeconometric Analysis of Survey Data, Hanoi, January 2011
Policy Briefs and Indepth Studies



The Effectiveness of Credit in Poverty Elimination. Presented to
the Central Institute for Economics Management, Hanoi,
Vietnam, March 2010
Households Savings in Vietnam. Presented to the Central
Institute for Economics Management, Hanoi, Vietnam, November
2008
Land use rights and productivity. Presented to the Central
Institute for Economics Management, Hanoi, Vietnam, November
2007
Income shocks and household risk coping
mechanisms






Motivation:
Vulnerability to shocks is a dominant feature of household
livelihoods in developing economies
Negative effect on welfare (income, wealth, health, etc.)
Vulnerability to poverty
Key challenge is maintaining satisfactory levels of
consumption
Research question:
What strategies do rural households in developing countries
employ to avoid consumption shortfalls caused by adverse
income shocks?
Income shocks and household risk coping
mechanisms









Important risk coping strategies:
Precautionary savings (cash, livestock, grain stores)
Credit
Insurance
Government social safety nets
Insurance and government safety nets do not fully cover risks
Welfare implications:
Savings for precautionary purposes will lead to lower welfare
outcomes in the long run given that it uses up resources that
could be put to more productive uses
Rising levels of indebtedness for consumption purposes can
also cause problems in the long run
Income shocks and household risk coping
mechanisms

Policy implications:

Mechanisms to reduce the
uncertainty associated with income
generating activities will have
welfare enhancing effects

Could be achieved through
extending existing formal
insurance contracts to cover
weather related events
Social Capital and Savings Behaviour

Motivation:

High levels of saving in Vietnam but most saving is held in the
form of cash held at home

Formal financial institutions estimated to reach over 70% of
households but levels of formal saving as low as 7% in some
communities

Extensive levels of local group membership in Vietnam compared
with other countries

Important role of state in governance but decentralisation under
hierarchy of Communist Party through local socio-political
organisations, e.g. Women’s Unions

Research Question:

What role can mass organisations play in helping households
access formal financial markets in rural communities
Social Capital and Savings Behaviour

Key results

Women’s Groups have a positive influence on the formal savings
behaviour of group members

Information disseminated through networks can fill an information
gap reducing the uncertainty about the riskiness of returns to
saving formally and reducing the costs associated with opening a
savings account

Policy implications:

Targeting information on the benefits of formal saving and the
financial services available to households through Women’s Unions
could be effective in increasing the number of households that
save for productive purposes
Trinity International Development Initiative
Annual Development Research Week
November 7th, 2011
The Micro-foundations of Development: an
Exploration of Access to Resources and the
Livelihoods of the Rural Poor in Vietnam
Carol Newman