Self‐Employment and Its Influence on the Vulnerability to Poverty of Households in Rural Vietnam—A Panel Data Analysis

Abstract

The following paper analyses whether becoming self‐employed can help to reduce the vulnerability to poverty of rural households. We use data collected during four survey waves in three rural provinces in Vietnam to calculate region‐specific logistic panel regressions. The results show that becoming self‐employed increases the likelihood of poor households escaping poverty, but only if they are located in a regional economic environment characterized by an advanced stage of structural change, good infrastructural conditions, and proximity to markets. In less well‐developed regions, becoming self‐employed is not sufficient to increase the probability of poor households escaping poverty. What matters more is that self‐employment is driven by opportunity and not by necessity. However, even opportunity‐driven self‐employment does not guarantee a reduction of vulnerability to poverty in all regional settings and for all household types. Especially, regional overspecialization in cash‐crop production and inequality in access to assets have to be taken into account. In times of declining commodity prices, self‐employment entails a risk of business failure in regions that are overspecialized in cash‐crop production. For households whose initial investment is high and whose endowment with social and educational assets is low, this can result in increased vulnerability to poverty.

Impacts of off‐farm employment on welfare, food security and poverty: Evidence from rural Vietnam

“…Several empirical studies have investigated the effects of off-farm activities on household welfare in rural Vietnam. Significant association between offfarm employment and household welfare was found in studies by Hoang, Pham, and Ulubaşoğlu (2014), Imai et al (2015), Oostendorp, Trung, and Tung (2009), Sohns and Revilla Diez (2017), Tran (2015) and van de Walle and Cratty (2004). In particular, van de Walle and Cratty (2004) noted that participation in off-farm self-employment activities reduces the probability of being poor for some, but not for all.…”

“…However, as in other developing countries, rural households in Vietnam whose livelihoods greatly rely on agriculture face substantial income shocks due to climate change and market variability (Nguyen, Raabe, & Grote, 2015). In addition, there has been a lack of sufficient support from the government, and rural households have had only limited economic opportunities (Sohns & Revilla Diez, 2017). Rural households in Vietnam resort to savings, credit, private transfers (including remittances from abroad) and income diversification as coping strategies (Nguyen et al, 2015; Tran, 2015).…”

The welfare impact of Vietnam’s national target programme ‘building a new countryside’: A quasi-experimental evaluation

“…Those who are self-employed in non-farm activities cannot be guaranteed a poverty decline in remote rural regions because of their relative geographical isolation, limited assets, poor health status, and low levels of education. The poverty is quite persistent (Arouri et al 2017;Hoang et al 2014;Sohns and Diez 2017).…”

Geography of Inequality in Asia

“…Local conditions, such as agglomeration externalities, human capital endowments, and local expenditures, determine the competitiveness of Georgian firms (Rodriguez‐Pose and Hardy ). Self‐employment activities can help to diminish regional inequality by reducing the vulnerability to poverty of rural households (Sohns and Diez ). Transportation is also considered an important factor in reducing geographical barriers and promoting regional integration, but transportation networks are hierarchical and unevenly distributed (Liu and others ).…”

“…It covers conventional indicators of economic/income inequality, such as gross output and productivity in China (He and others ), but also examines dimensions such as transportation networks (Liu and others ) and energy trade (Yang and others ) in Southeast Asia. Papers in this special issue study the nature of the interrelationship between poverty and inequality in Vietnam (Sohns and Diez ) and India (Yenneti and others ), and scale down the research by studying firm dynamics in China (He and others ) and competitiveness in Georgia (Rodriguez‐Pose and Hardy ), although some Georgians do not consider themselves to be Asian. The special issue also moves beyond the orthodox inequality studies focusing on output to studying network inequality and its role in spatial inequality (Yang and others ; Liu and others ).…”