Dominique van de Walle

Sources of Ethnic Inequality in Vietnam

Vietnams ethnic minorities, who tend to live mostly in remote rural areas, typically have lower living standards than the ethnic majority. How much is this because of differences in economic characteristics (such as education levels and land) rather than low returns to characteristics? Is there a self-reinforcing culture of poverty in the minority groups, reflecting patterns of past discrimination? The authors find that differences in levels of living are due in part to the fact that the minorities live in less productive areas characterized by difficult terrain, poor infrastructure, less access to off-farm work and the market economy, and inferior access to education. Geographic disparities tend to persist because of immobility and regional differences in living standards. But the authors also find large differences within geographical areas even after controlling for household characteristics. They find differences in returns to productive characteristics to be the most important explanation for ethnic inequality. But the minorities do not obtain lower returns to all characteristics. There is evidence of compensating behavior. For example, pure returns to location-even in remote, inhospitable areas-tend to be higher for minorities, though not high enough to overcome the large consumption difference with the majority. The majority ethnic groups model of income generation is a poor guide on how to fight poverty among ethnic minority groups. Nor is it enough to target poor areas to redress ethnic inequality. Policies must be designed to reach minority households in poor areas and to explicitly recognize behavior patterns (including compensating behavior) that have served the minorities well in the short term but intensify ethnic inequalities in the longer term. It will be important to open up options for minority groups both by ensuring that they are not disadvantaged (in labor markets, for example), and by changing the conditions that have caused their isolation and social exclusion.

Choosing Rural Road Investments to Help Reduce Poverty

The author examines how rural road investment projects should be selected and appraised when the objective is poverty reduction. After critically reviewing past and current practices, the author develops an operational approach grounded in a public economics framework in which concerns of equity and efficiency are inseparable, information is incomplete in important ways, and resources are limited. She addresses a key problem: that an important share of the benefits to the poor from rural roads cannot be measured in monetary terms. The selction formula she proposes aims to identify places where poverty and economic potential are high and access is low. She illustrates the method using data for and project experience in Vietnam. Among the advantages of proceeding as outlined in her proposal: This approach holds the hope of building capacity and is participatory; it extracts local information that may not be readily available to the central government; and it appears to be feasible because it relies on local authorities participating in the appraisal of subprojects.

Assessing the welfare impacts of public spending

An important objective of public spending is to raise household living standards, particularly for the poor. But how can final impacts on this objective best be assessed? Evaluating a policys impact requires assessing how different things would have been in its absence. But the counterfactual of no intervention is tricky to quantify. The author surveys the methods most often used to assess the welfare effects of public spending. Limitations of current practices are studied and implications for future best practices are drawn. The methods used to assess welfare impacts broadly fall into two groups: benefit incidence studies and behavioral approaches. Benefit incidence studies ignore behavioral responses and second-round effects, using the provision cost as a proxy for benefits received. Behavioral approaches present quite different drawbacks, in attempting to represent individual benefits correctly. A number of recent studies usefully combine both approaches. It is still uncertain whether behaviorally consistent methods actually point to fundamentally different policy recommendations. What can be concluded is that we need to diversify and compare results from our evaluation methods and broaden our definition of well-being, to see how various facets of living standard are affected by public spending.

Testing a social safety net

Abstract Standard benefit-incidence analysis does not distinguish policy impacts on persistent poverty from transient poverty. We offer an alternative approach, based on actual and simulated joint distributions of consumption over time, which allows us to distinguish the extent of ‘protection’ against poverty from ‘promotion’ out of poverty. The approach is illustrated by an analysis of the distributional impact of changes in cash benefits introduced to compensate for other policy reforms in Hungary. Cash benefits protected many from poverty, but promoted few out of poverty. The safety nets impact on poverty was largely due to higher average outlays, rather than improved targeting.

Does India's employment guarantee scheme guarantee employment ?

In 2005 India introduced an ambitious national anti-poverty program, now called the Mahatma Gandhi National Rural Employment Guarantee Scheme. The program offers up to 100 days of unskilled manual labor per year on public works projects for any rural household member who wants such work at the stipulated minimum wage rate. The aim is to dramatically reduce poverty by providing extra earnings for poor families, as well as empowerment and insurance. If the program worked in practice the way it is designed, then anyone who wanted work on the scheme would get it. However, analysis of data from Indias National Sample Survey for 2009/10 reveals considerable un-met demand for work in all states. The authors confirm expectations that poorer families tend to have more demand for work on the scheme, and that (despite the un-met demand) the self-targeting mechanism allows it to reach relatively poor families and backward castes. The extent of the un-met demand is greater in the poorest states -- ironically where the scheme is needed most. Labor-market responses to the scheme are likely to be weak. The scheme is attracting poor women into the workforce, although the local-level rationing processes favor men.

The impact on poverty of food pricing reforms: A welfare analysis for Indonesia

Abstract Econometric measures of household welfare are estimated for Indonesia and used to construct welfare distributions consistent with individual demand responses to price and income variability. The effects on poverty of hypothetical reforms of rice pricing and input subsidy policies are then examined by means of dominance tests. With full producer income effects, poverty orderings are found to depend critically on the choice of poverty measure and poverty line, though all distributionally sensitive measures indicate adverse effects on poverty of uncompensated trade liberalizations over a wide range of poverty lines. The poverty effects of price changes at fixed producer incomes are shown to depend crucially on how the necessary producer compensation is financed.

Rural Roads and Local Market Development in Vietnam

Abstract We assess impacts of rural road rehabilitation on market development at the commune level in rural Vietnam and examine the geographic, community, and household covariates of impact. Double difference and matching methods are used to address sources of selection bias in identifying impacts. The results point to significant average impacts on the development of local markets. There is also evidence of considerable impact heterogeneity, with a tendency for poorer communes to have higher impacts due to lower levels of initial market development. Yet, some poor areas are also saddled with other attributes that reduce those impacts.

Rural Roads and Poor Area Development in Vietnam

The authors assess impacts of rural road rehabilitation on market development at the commune level in rural Vietnam and examine the variance of those impacts and the geographic, community, and household factors that explains it. Double difference and matching methods are used to address sources of selection bias in identifying impacts. The results point to significant average impacts on the development of local markets. They also uncover evidence of considerable impact heterogeneity, with a tendency for poorer communes to have higher impacts due to lower levels of initial market development. Yet, poor areas are also saddled with other attributes that reduce those impacts.

Infrastructure and poverty in Viet Nam

Viet Nam has poor physical infrastructure and high levels of income poverty. What role might better infrastructure play in reducing poverty in Viet Nam? This paper explores the link between poverty and lack of infrastructure using the 1992-93 Viet Nam Living Standards Survey. The household data indicate that, although there are some regional and urban-rural imbalances, in general, access to infrastructure is not very different between poor and non-poor - infrastructure tends to be bad for everyone. Simulations of the potential benefits from an expansion of irrigation infrastructure, and under certain assumptions about how it would be distributed, suggest that the policy would be redistributive, representing proportionately greater gains to the poor. The most pro-poor impacts would occur in Viet Nams poorest regions and under a policy which targeted irrigation expansion to small per capita landholding households. The average annual economic rate of return of the irrigation investments considered would be at least 20 percent. The paper also finds evidence that various constraints over and above that presented by lack of irrigation appear to diminish the benefits of irrigation to poor and non-poor alike.

Are Returns to Investment Lower for the Poor? Human and Physical Capital Interactions in Rural Vietnam

If the marginal gains from investment in physical capital depend positively on knowledge, but a household cannot hire skilled labor to compensate for low skills, then even if it has access to credit, the household will achieve lower returns than an educated household. If, as is common, the income-poor are less educated because of failures in the credit market, and because they live in areas where there is less access to schooling, then the poor will also have lower returns on investments. The author tests this argument for the case of irrigation infrastructure in Vietnam. She asks how a households education level, and demographic characteristics influence the gains to household income from irrigating previously unirrigated land. The next marginal benefit of irrigation increases strongly with the education of a household. The results suggest that unless disparities in education are addressed, market-oriented reforms will generate inequitable agricultural growth in Vietnam.