A profile of poverty dynamics

Over the three year period, the majority of households stayed non-poor (nearly 65 percent) and the other 35 percent was vulnerable to poverty at some level. This pattern shows good progress in poverty reduction in which a large share of the population rose up, nearly 16 percent, and a small share of the population fell down at slightly more than 6 percent.

Additionally, only a small share of the population moved around the poverty line (7 percent) and a similar share stayed poor in all periods (nearly 7 percent) (see Table 2.2).

The changes in poverty statuses also differ across sub-groups of the population, a matter that will be discussed in the remaining part of this sub-section.

Table 2.2 Household and head characteristics by poverty trajectory, percent

Non-poor Rising Falling Churning Poor Average

Household size 4.1 4.9 4.2 4.7 5.1 4.3 shares and those of the same category sum to 100.

Poverty is usually associated with a large sized family and a higher burden of dependency.

Non-poor households tend to have fewer members and a lower dependency ratio, 4.1 and 0.3 respectively, while those who are poor in at least one period have nearly five members and a higher dependency ratio of 0.5. In fact, the poor have low incomes and low asset levels so they tend to live together and share their limited resources. Moreover, poverty in this case is measured by per head expenditure, which transfers the effect of household size directly to poverty (see Table 2.2).

In a typical Vietnamese household, the oldest man is often the head. In cases where the man is unable to manage the household because of his lack of ability, health problems, or is missing because of death, divorce, etc. the women will be the head. This explains why more

than 84 percent of the heads are men and also explains why female headed households are of a smaller size (see Table 2.2).

There is a tendency that young and old households, headed by young or old persons, are more vulnerable to poverty than middle-aged ones. They are less likely to stay non-poor and are more likely to fall into poverty, fluctuate around the poverty line or stay poor. Young households are usually newly formed ones which mean they also have to invest in bearing and caring for children. Older households are usually wealthier because they have experience in agriculture and livestock production and have accumulated more savings and assets. However, older heads are associated with having lower skills and being less healthy subsequently making them more vulnerable to poverty, which is confirmed by the result of a t test.

The education of household heads differs significantly across poverty trajectories. Nearly sixty percent of households headed by men or women without any schooling are vulnerable to poverty. On the contrary, only eight percent of households headed by men or women with a tertiary education are poor in at least one period, almost none are poor forever. In addition, only 10 percent of the Kinh heads are illiterate while 32 percent of the other heads cannot read or write. Moreover, the Kinh are usually located in lowlands, which enables them to have better access to markets giving them a much lower risk of being poor.

Similarly, the occupation of the head also plays an important role in the improvement of a household's wealth. A large share of households (nearly 83 percent) in central Vietnam is from an agricultural background. Agricultural activities in Vietnam are generally still at a low level of development and yield low incomes. Additionally, this production depends heavily on natural resources and weather conditions which causes individuals in this sector to be more vulnerable to poverty than those who engage in non-agricultural activities.

The industrial development in urban areas results in a massive rural-urban flow of migration. Skilled people have more chances to migrate because it is easier for them to find a job or to gain more skills in urban areas. In addition, migrants and especially students might need financial support at the beginning, and wealthier households are more capable of providing this. This explains why non-poor households are more likely to have migrants and tend to have a greater number of migrants than poor households. Correspondingly, non-poor households have more migrants, live with non-non-poor neighbours, friends and relatives and send more remittances to other people with the result that they get more remittances than poorer households. A non-poor household has an average in or out flow of more than

$130 per year while a poor household has much lower amount (see Table 2.2). Obviously,

the chronically poor households are the ones that should be supported the most, but they actually get a smaller amount of remittance ($14 per year) on account of their being poor not only in income but in social capital as well. On the contrary, poor households tend to receive more public transfer, which is of various forms such as the poverty and hunger fund, contingency fund, natural disaster aid, etc. Non-poor households get less public transfer, the majority of which is in the form of a pension.

A household's physical capital can be measured by various proxy indicators. Since the majority of households engage in agricultural activities and land is a primary and important input, it is thus a reasonable measure of household wealth. Households in Ha Tinh are particularly more disadvantaged than their counterparts as they have less land which is also not very fertile. Dak Lak households have more land which is suitable for the production of high value agricultural products such as coffee and pepper. Hence, more land could enable a household in Dak Lak to generate a higher income. However, in some mountainous areas in Ha Tinh and Thua Thien Hue, households in the forest margins are usually poor and are allocated forest from local governments. Yet, forest is still a low value added activity in Vietnam so households there are land rich but income poor.

The asset index is also believed to be a good proxy for household wealth (see Filmer and Pritchett, 2001). It differs significantly across groups; non-poor households are again owners of higher asset levels while stay-poor households have the least, being 0.59 and 0.3¹¹ respectively. In addition, the location of the household can be used as a proxy for public physical asset such as infrastructure and some regional differences. More than half of the households are in mountainous and highland areas where infrastructure such as roads, electricity, schools and health clinics are in poorer condition and thus result in worse market access. Among the chronically poor households, the majority of them are in the mountainous and highland areas in Thua Thien Hue, particularly in two districts of Nam Dong and A Luoi, which are home to ethnic minority groups, poor soil quality and a poor condition of infrastructure.

In general, the living standards in these provinces are still low and households there mainly engage in agricultural production perpetuating their vulnerability to shocks. This point is supported by the numbers in Table 2.2, which show stay-poor households faced more shocks than non-poor ones. There are a number of natural disasters in that region every year including storms, floods, heavy rains, droughts, landslides, and cold weather, etc.

Households also suffer from agricultural shocks in the forms of livestock's death or disease,

11 The asset index is scaled to the range of [0,1]

crop pest, storage pest, etc. Health shocks cause an income loss because the patient and other household members cannot work for days and incur hospital medical costs. Social and business shocks are not frequent, with a mean of less than 0.1 shocks each wave hence it is not necessary to include them in the analysis. Looking at shocks by location we see households in Ha Tinh and Thua Thien Hue experienced more climatic shocks than the other households because the two provinces are located in a coastal area.