• Version
• Download 12
• File Size 0.00 KB
• File Count 1
• Create Date 01/03/2020
• Last Updated 04/10/2020

Determinants of income diversification and its effects on household income in rural Vietnam

By Ho Thi Ngoc Diep (VNP 16)

Supervisor: Dr. Ha Thuc Vien

Abstract

Income diversification has been a special attention of researchers, especially in developing countries. It is a means to increase household’s income and reduce risks of income volatility of each income source. However, the patterns and trends of income diversification vary from country to country and from region to region. This research aims at examining the determinants of income diversification among rural households in Vietnam and the impact of diversification on household’s total income in order to decide appropriate policy responses. Based on Vietnam Household Living standard surveys in 2002, 2004, 2006, 2008 and 2010, the descriptive analysis on a variety of concepts of diversification shows that the diversification in rural areas is very common and tends to increase over time. For instance, a number of income sources among rural households goes up to from 4.08 in 2002 to 4.28 in 2010. The analysis also indicates the growing importance of non-farm activities. Nevertheless, the extent of diversification is not the same between the rich and the poor. The poorer tend to have more income sources than the richer while the richer is much more diversified in terms of share of income from non-farm activities than the poorer. The econometric analysis uses methods of Poisson regression in the model of number of income sources and Tobit regression in the model of SID and NFS. The regression results show that socio-economic status and access to formal financial market both have positive impact on the number of income sources pursued by households and the Simpson index of diversification. Interestingly, it is found that the access to financial markets has negative effect on the share of non-farm income. The accessibility of infrastructure is also an important determinant of income diversification. The evaluation of reverse impact of diversification on household’s total income confirms that all of the three indicators of income diversification: a number of income source, share of non-farm income and Simpson index of diversity have positive impact on household’s total income. It implies that households try to increase their income by pursuing multiple income strategy, expanding their income generating out of agricultural activities and maintaining the balance among different income activities.

Attached Files