Impact of Public and Private Cash Transfers on Poverty and Inequality: Evidence from Vietnam

ArticleinDevelopment Policy Review 29(6) · November 2011with 128 Reads 
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Abstract
This article investigates the extent to which public and private transfers affected poverty and inequality in Vietnam in the mid‐2000s. It finds that the impact of public transfers on poverty was negligible, due to the low coverage of the poor and the relatively small amounts transferred. Moreover, the effect of the receipt of transfers on expenditures was small: recipients decreased the labour supply and only a limited amount of the extra income went to current consumption. Domestic private transfers were somewhat more successful in reducing poverty. With most public and private transfers going to non‐poor households, inequality was only marginally affected.

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  • ... Micro-credit and transfers are very important for household to increase income and consumption. In Vietnam, several studies find positive effects of micro-credit and transfers on household welfare (e.g., Quach and Mullineux, 2007;Nguyen, 2008;Van den Berg and Nguyen, 2011;Nguyen, 2013). Credit and transfers can help households who are affected by natural disasters smooth their consumption (Sawada, 2006). ...
    Article
    The study uses commune fixed-effects regressions to estimate the effect of natural disasters on welfare and poverty of rural households in Vietnam, and subsequently examines household and community characteristics that can strengthen resilience of house- holds to natural disasters. We find that all the three disaster types considered in this study including storms, floods, and droughts have negative effects on household income and expenditure. Households in communes with higher mean expenditure and more equal expen- diture distribution are more resilient to natural disasters. Access to micro-credit, internal remittances, and social allowances can help households strengthen the resilience to natural disasters.
  • ... When α ¼ 0, the index measures the proportion of people who live under the poverty line (headcount index); when α ¼ 1, the index represents the depth of poverty (poverty gap index); and when α ¼ 2, the index characterizes square poverty gap (poverty severity index). Following the literature, we employ per capita consumption expenditure as a proxy for welfare (Razavi, 1998; Van den Berg and Cuong, 2011). Income inequality is measured by the three most common indices: Gini, Theil L and Theil T. The Gini coefficient , which is based on the Lorenz curve, is the most widely used to measure inequality due to its straightforward calculation, flexibility across different population groups and independence from sample size and scale of the economy. ...
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    Natural disasters are expected exacerbate poverty and inequality, but little evidence exists to support the impact at household level. This article examines the effect of natural disasters on household income, expenditure, poverty and inequality using the Vietnam Household Living Standard Survey in 2008. The effects of a natural disaster on household income and expenditure, corrected for fixed effects and potential endogeneity bias, are estimated at 6.9% and 7.1% declines in Vietnamese household per capita income and expenditure, respectively. Natural disasters demonstrably worsen expenditure poverty and inequality in Vietnam, and thus should be considered as a factor in designing poverty alleviation policies.
  • ... Although, social protection services are often mentioned as key contribution to poverty reduction by mass media, there has been little quantitative research on this issue in Viet Nam. Exceptions are Van de Wall (2002), Even et al. (2007), Van Den Berg and Nguyen (2010). Van de Wall (2002) Berg and Nguyen (2010) found that the impacts of public transfers on poverty were quite low, due to low coverage of the poor 7 and relatively low amounts transferred to the poor. ...
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    Full-text available
    This study aims to evaluate access to social services of the most vulnerable groups of Vietnamese people, as well as propose some policy recommendations for improving targeting mechanisms for the social protection system in Viet Nam. We will use the Viet Nam Household Living Standard Surveys in 2000s to pursue these research objectives. In particular, we will focus on following social services: (1) school; (2) health care; (3) pension and allowances; (4) housing conditions; (5) clean water and sanitation; (6) durables; (7) electricity; (8) support programs; and (9) infrastructure. The most vulnerable groups include: (1) children; (2) the elderly; (3) ethnic minority people; and (4) the poor. All indicators representing access to social services of these people will be disaggregated into gender, areas, and regions.
  • ... Public and private transfers, by and large, were found to be unresponsive to health shocks. Limited reliability on public transfers seems to be consistent with the result by Van-den-Berg and Nguyen (2011) that public transfers' impact on poverty and inequality in the early 2000s was low, because of low coverage of the poor and relatively low amounts transferred to the poor. In our sample, approximately 10% of households were classified by local authorities as poor and therefore entitled to monthly income support. ...
  • ... Public and private transfers, by and large, were found to be unresponsive to health shocks. Limited reliability on public transfers seems to be consistent with the result by Van-den-Berg and Nguyen (2011) that public transfers' impact on poverty and inequality in the early 2000s was low, because of low coverage of the poor and relatively low amounts transferred to the poor. In our sample, approximately 10% of households were classified by local authorities as poor and therefore entitled to monthly income support. ...
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  • ... Although several studies investigated the efficiency, the evolution, and the progressive implementation of the program over time (Turk 1999;van de Walle 2004b;Berg and Cuong 2011;The World Bank 2012;Oxfam 2017b), little is known about how HEPR affects child development, and in particular educational outcomes. 3 This gap may at least in part be due to data limitation and 1 Due to its randomized nature when first launched in 1997, PROGRESA-the conditional cash transfer (CCT) program of Mexico, has been widely studied for its impacts both in short and longer term periods (Gertler 1999;Fernald, Gertler, and Neufeld 2009;Behrman, Parker, and Todd 2011;Attanasio, Meghir, and Santiago 2012;Adhvaryu et al. 2018). ...
  • ... In three of the case studies included in this review, remittances are significantly larger than cash transfers (e.g. Hernandez et al., 2012;Tesliuc and Lindert, 2002; Van den Berg and Viet Cuong, 2011;and World Bank, 1999), hence explaining their stronger impact on poverty reduction. The exception is again Gianetti et al. (2009), where social transfer levels are generally quite high (especially considering that most households receive multiple transfers)-though not always higher than remittances-and the impact of social protection transfers is stronger. ...
    Technical Report
    Full-text available
    Using a rigorous, evidence-focused review method, this literature review found 11 relevant studies that directly compare the impacts of cash transfers and remittances on a range indicators of poverty at the household level. The evidence base is small and highly context-specific. External and internal validity of most studies are limited, so the conclusions that can be drawn from this review are tentative. In the majority of studies both cash transfers and remittances are shown to have positive impacts on reducing poverty. Overall, remittances seem to have stronger poverty reducing impacts. There are a number of factors that seem to explain why remittances have a greater effect. In the studies reviewed here, remittances appear to reach both a greater share of the overall population, than cash transfers, and more poor households. Furthermore, remittances were higher in value in the majority of studies reviewed. Finally, two studies show that remittances are put towards different uses. Further high-quality research is needed on all factors.
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  • Living in urban areas 2153.831*** [113.708] Dummy variable for
    • Delta Mekong River
    Mekong River Delta 112.034 [114.875] Living in urban areas 2153.831*** [113.708] Dummy variable for 2006 526.461*** 570.941*** 550.712*** 441.581*** 505.639*** 483.726*** [39.294] [39.178] [50.505] [39.315] [39.935] [54.171] Constant 3900.198*** 4035.709*** 4272.106*** 4909.112*** 6472.702*** 6900.150*** [51.859] [32.177] [55.191] [204.735] [308.556] [445.349] Observations 8432 8432 8432 8432
  • ] -0.0287*** -0.0146*** -0.0212*** -0.0286*** -0.0117* -0.0159** Domestic transfers per capita (thousand VND)
    Source: Estimation from panel data VHLSSs 2004-2006. [0.0046] [0.0079] [0.0092] [0.0065] [0.0116] [0.0131] -0.0287*** -0.0146*** -0.0212*** -0.0286*** -0.0117* -0.0159** Domestic transfers per capita (thousand VND) [0.0034] [0.0042] [0.0066] [0.0048] [0.0062] [0.0067] -861.0810*** -642.9849*** -622.3706*** 109.2682*** 20.892 -9.0937
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    This chapter examines the different strategies used by households and individuals to avoid consumption shortfalls caused by risk. It focuses on income-based strategies, assets as self-insurance, and informal insurance arrangements. Income-based strategies are limited due to entry constraints into profitable activities. Self-insurance is limited by access to assets and poor functioning of asset markets. Informal insurance arrangements are hampered by sustainability constraints, which exclude the poor from these arrangements.
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    Drawing on quantitative survey data and in-depth interviews, this article seeks to map out the potential direct and indirect effects of simple cash transfers on households in impoverished rural and urban settings. Brazil is shown to have an extensive system of old age pensions, which affords almost universal coverage to households containing older people. These benefits have a significant impact on levels of poverty and vulnerability in recipient households. They also facilitate access to essential healthcare items, such as drugs, which are seldom freely available through the state health system. The in-depth interviews reveal that pensions can have important effects on intra-household relations, but these effects were not generalizable nor easily captured by quantitative survey tools. There was clear evidence that pensions reduced the propensity of older people to remain economically active, but this must be understood in a context of limited employment opportunities for all age groups and a high prevalence of disability. Overall, the article demonstrates the complex effects of a relatively simple cash transfer, which policy makers need to take into account.
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    This paper uses household level unit record data from South Africa to examine the behavioural and welfare impacts of private and public transfers. We allow for joint endogeneity of resource variables and the expenditure shares. Our results show that crowding out of private transfers as a result of the introduction of public pensions holds only for poor households and not for the non-poor. Both private transfers and public pensions significantly reduce poverty but private transfers have a larger impact on expenditure patterns. The results also reject the hypothesis of income pooling underlying the conventional unitary model by finding that the marginal impact on expenditures are different for public pension received, private transfer received and other resources flowing into the household. The principal conclusions are robust to changes in specification.
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    Cash transfer programs create multiplier effects when recipients put the money they receive to work to generate further incomes. When this is the case, the ultimate income effects are multiples of the amounts transferred. We analyze the PROCAMPO program in Mexico that was introduced to compensate farmers for the anticipated negative effect of NAFTA on the prices of basic crops. The transfer rules and the timing of the panel data collected allow unique control of biases in this impact analysis. We find that the multiplier among ejido sector recipients is in the range 1.5–2.6. Multipliers are higher for households with medium and large farms, low numbers of adults in the household, nonindigenous backgrounds, and located in the Center and Gulf regions. High multipliers reflect income opportunities that had remained unrealized due to liquidity constraints that are relaxed by the transfers. Opportunities come from the asset endowments that these households received through the land reform, particularly irrigated land, and they are enhanced by access to technical assistance.
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    Full-text available
    Policy makers view public sector-sponsored employment and training programs and other active labor market policies as tools for integrating the unemployed and economically disadvantaged into the work force. Few public sector programs have received such intensive scrutiny, and been subjected to so many different evaluation strategies. This chapter examines the impacts of active labor market policies, such as job training, job search assistance, and job subsidies, and the methods used to evaluate their effectiveness. Previous evaluations of policies in OECD countries indicate that these programs usually have at best a modest impact on participants' labor market prospects. But at the same time, they also indicate that there is considerable heterogeneity in the impact of these programs. For some groups, a compelling case can be made that these policies generate high rates of return, while for other groups these policies have had no impact and may have been harmful. Our discussion of the methods used to evaluate these policies has more general interest. We believe that the same issues arise generally in the social sciences and are no easier to address elsewhere. As a result, a major focus of this chapter is on the methodological lessons learned from evaluating these programs. One of the most important of these lessons is that there is no inherent method of choice for conducting program evaluations. The choice between experimental and non-experimental methods or among alternative econometric estimators should be guided by the underlying economic models, the available data, and the questions being addressed. Too much emphasis has been placed on formulating alternative econometric methods for correcting for selection bias and too little given to the quality of the underlying data. Although it is expensive, obtaining better data is the only way to solve the evaluation problem in a convincing way. However, better data are not synonymous with social experiments.
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    This paper is concerned with exploring the role of the household as a risk-mitigating institution in low-income rural settings, with particular attention to the relationship between the structure of households and ex post income (consumption) smoothing. Aside from the family's pre-eminent role in determining population growth and human capital investment, two key development factors, the ties of common experience, altruism and heritage among family members enable families to transcend some of the information problems barring the development of impersonal markets, a salient characteristic of low-income environments.
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    Introduction -- Why public action for more insurance and social protection? -- Some limits to social protection -- Learning from informal risk-sharing institutions -- Social risk-sharing institutions and exclusion -- Scaling up informal institutions -- The scope for public action to provide broader social protection -- Introducing new insurance products -- Promoting more self-insurance via savings and microcredit -- The role of targeted transfers -- Institutions, credibility and public action Estudio preparado por el World Institute for Development Economics Research (WIDER), the United Nations University
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    Private income transfers are becoming increasingly recognized as a key aspect of the U.S. economy. The majority of private income transfers occur inter vivos (i.e., between living persons), but very little is known about this type of transfer behavior. This paper tests alternative hypotheses concerning motivation for inter vivos transfers. Two motives are considered: altruism and exchange. Evidence presented here casts doubt on the altruistic model of transfer behavior. Observed patterns for inter vivos transfers are more consistent with exchange-related motives. This finding has important implications for the effects of public transfer programs on the distribution of economic well-being. Copyright 1987 by University of Chicago Press.
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