Trinity International Development Initiative Annual Development Research Week November 7 th, 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 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 7 th, 2011 The Micro-foundations of Development: an Exploration of Access to Resources and the Livelihoods of the Rural Poor in Vietnam Carol Newman