3.1.1
Classification of income
Each household in this study can earn income from seven main types of sources, as displayed in
Figure 3.1. They are incomes from environmental resources, non-farm and/or non-wage businesses, private and public transfers, wage employment, rental income, sales of assets and other activities. Environmental income is further divided into two main components: common property resources income and agriculture environmental income. Therefore, the overall household income can obtained from eight income sources.
Figure 3-1 Rural household income accounting (classified by the author)
Environmental income: The components of the environmental income calculation in this study will follow the definition of environmental income suggested in UNDP et al. (2005). Accordingly, environmental income comprises common property resources income and agricultural income. Common property resources income consists of incomes from fisheries and forestry products. For example, forestry products from common property resources include timber and non-timber forest
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products, such as fuelwood, medicines, animals, etc. Aquaculture products from common property resources are derived from fish, shrimps, oysters, crabs, etc. In terms of agricultural income, it consists of income from crop production, livestock production and aquaculture production.
Wage employment refers to a wide range of work for wages in public administration, corporations, manufacturing factories, or professionals working in the science, education and training sector. In addition, these income components also include wages involved in the supply of paid labour on farms.
Non-farm, non-wage business-related incomes include income from non-agriculture, non-forestry, non-aquaculture businesses, non-wage employment and production trades. It also includes incomes from the processing of agricultural, forestry and aquaculture products, as well as agriculture and aquaculture services.
Transfers is defined as the sum of all private transfers (money or goods from persons who are, or are not, household members, such as children, relatives living elsewhere, friends or neighbours) and public transfers (funds from various government programmes) over the past 12 months. Transfers can be in cash or in kind.
Rental income and sales of assets include incomes from rental activities (land/real estate and other assets) and from selling household assets.
Other income - besides the six major income components identified above, interest from savings and loans, pensions, lottery winnings, and earnings from share investments, are regarded as other income.
3.1.2
Calculation of income
The calculation of income in this study is based on five assumptions and the available data:
i) Only actual harvested products from environmental resources are included in the income calculation. The price of the products is the actual price the households provide. In the case that the price of the products is missing; for example, the household forgets the price of the products they sell, then the regional average selling price for the products will be used.
ii) Based on the data available in the VARHS dataset, only the extractive or consumptive direct value of products from environmental resources are analysed. This means that the value of natural-based tourism and payments from environmental services are not included in environmental income.
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iii) Gross value of products from common property resources will be applied because the cost information is not provided in the Vietnam Access to Resources Household Survey (VARHS). However, Babulo et al. (2008) explained that to collect products from common property resources, households normally require low or medium skill levels with minimal capital investments, and the opportunity cost of labour is insignificant. Thus, the gross value of environmental income is a good substitution for natural rent.
iv) Energy, mineral and water resources are not explicitly expressed in the environmental income components because such information is not provided in the VARHS dataset. Energy and mineral resources are assumed to have minimal impacts on rural households. Rural households do not gain a direct source of income from large-scale mineral and energy extraction (UNDP et al., 2005) and these resources are not widely available, especially in Vietnam, and are only indirectly relevant to rural livelihoods (Ellis, 2000b). However, the value of water resources may be included implicitly, for example, rural households use water for their crop production (see Worldbank, 2006).
v) Net income includes the value of own-labour costs by households. According to Babulo et al. (2008), the computation of opportunity cost of labour time is difficult in the case of an absent or imperfect labour market. This is confirmed by Van de Walle’s (1998) study on infrastructure and poverty in Vietnam. The author did not exclude household’s own labour costs in the net crop income because there is uncertainty about how to calculate the opportunity cost for the household’s own labour.
Following these assumptions, the components of total income in this current study are calculated, as follows:
Cropping production income is obtained by deducting crop production costs from the gross value of crop production, including income from orchard gardens. The gross income value of crop production is the sum of the sales value, the value of crop by-products and the value of crop production
consumed at home. In addition, forestry products from plots operated by the households, but not from communal forests, are also included in cropping production. Crop production costs are costs for seeds, fertilisers, pesticides, land rentals, hired labour, storage and marketing.
Livestock income - similar to cropping income, is derived from the value of sales and home
consumption of animal products (including meat and other animal products, such as milk and eggs) minus the value of animal purchases and other production costs.
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Aquaculture income is calculated in a similar way to cropping income, that is, the gross value of sales and home consumption minus the production costs (seeds, breed, energy, etc.).
Non-farm and/or non-wage business income captures the amount of money the households earned from cash revenues, the value of exchanged goods and services, the value of goods and services consumed by the households and the value of by-products consumed or sold by the households. This gross income excludes the costs related to non-farm and/or non-wage business activities to obtain the net income.
Wage employment is estimated by the sum of annual earnings in wages and value of in-kind payments from the most time-consuming job over the past 12 months.
Transfers is defined as the sum of all private transfers (money or goods from persons who are or are not household members, such as children, relatives living elsewhere, friends or neighbours) and public transfers (funds from various public institutions such as insurance money or social assistance) over the past 12 months.
Rental income and sales of assets include incomes from rental activities (land/real estate and other assets) and from selling household assets over the past 12 months.
Other income includes pensions, lottery winnings, earning from share investments and interest from savings and loans.