Export Liberalization and Household Welfare: The Case of Rice in Vietnam

Abstract

Vietnam has rapidly become one of the three largest rice exporters in the world, in spite of a binding export quota. This article uses a multimarket spatial-equilibrium model to examine the effect of further liberalization on regional rice prices. Household data are then used to calculate the welfare impact of these price changes on different household groups. The results suggest that although rice export liberalization would raise food prices and exacerbate regional inequality, it would also increase average real income and reduce (slightly) the incidence and severity of poverty. We explore several explanations of these apparently paradoxical results. Copyright 1998, Oxford University Press.

Trade Liberalisation and Poverty Dynamics in Vietnam

“…The significant effects accord well with the shocks identified in the discussion of trade policy (although not all those identified could be included), and given that we use only initial variables we are free from worries about endogeneity. Indeed the predictive power of the initial variables gives strong support to their use in ex ante predictions of the effects of liberalisation as made by, for example, Ravallion and van de Walle (1991) for Indonesia and Minot and Goletti (1998) for Vietnam. Nonetheless, it is desirable to push the model a little harder to test its sensitivity.…”

“…In contrast to their benefits for producers, price increases in consumer goods, especially rice, harm net consumers. According to our calculations based on the VLSS 92-93, rice on its own accounted for 44 percent of total food expenditure on average, and 53 percent for poor households: rice alone comprises about 75 percent of the total calorific intake of the typical Vietnamese household (Minot and Goletti, 1998). Clearly rice prices will be a major determinant of poverty, and in Niimi et al, (2004) we offer a full analysis of the rice market and the importance of different household consumption patterns in determining the poverty impacts of the rice price increases.…”

“…They turn out to be very robust in this regard and so we do not pursue the issue here. The approach used in this paper differs in this respect from that followed by Minot and Goletti (1998) or Benjamin and Brandt (2004) who consider households' net positions in rice as a way of predicting ex ante the poverty effects of rice reform. 14 Both studies predict that households, especially rural households, experienced rising real incomes (and declining poverty incidence) that could be linked, at least in part, with the rice market liberalisation but do not test their predictions.…”

Modelling Agricultural Trade and Policy Impacts in Less Developed Countries

“…Deaton (1997) shows that the NBR can be interpreted as the elasticity of (short-term) welfare with respect to the price of the commodity (see also Minot and Goletti, 1998). Thus, they are more useful than marketed surplus shares for exploring the welfare implications of an agricultural commodity-price change.…”

Are price controls necessarily bad? The case of rice in Vietnam

“…If an optimal policy-mix of manufacturing level taxes and price controls were to be designed, including rice price controls may well make sense. 2 Minot and Goletti (1998) use a multi-market spatial equilibrium model to analyse the welfare impacts of rice export liberalization in Vietnam but come to different conclusions. Their model results suggest that "although rice export liberalization would raise food price and exacerbate regional inequality, it would also increase average real income and reduce (slightly) the incidence and severity of poverty".…”