PROCESO CONCEPTUAL DEL SISTEMA FORMAL

The thesis is structured into eight chapters. Except for Chapters 1 and 8, which are the introduction and conclusion, respectively, the chapters are written as independent essays on impact evaluation. Chapter 2 reviews the most popular methods of quantitative impact evaluation, which are used to address the problem of program selection. Among the impact evaluation methods, the matching method receives special attention and has been increasingly

used in recent years. The traditional literature often deals with the impact evaluation of a single program. However, in reality people can participate in several programs simultaneously. Thus, Chapter 3 contributes to the literature on program impact evaluation by discussing the impact evaluation of multiple programs using regression and matching methods.

The research questions on poverty targeting and the impacts of different economic flows including governmental credit (operated by Vietnam Bank for Social Policies (VBSP)), informal credit, public and private transfers, international remittances, work and non-work migration on poverty and inequality in Vietnam are addressed in Chapters 4 through 7. Poverty is measured by three Foster-Greer-Thorbecke poverty indexes, while inequality is measured by the Gini coefficient, Theil’s L and Theil’s T indexes. Per capita expenditure is used as a welfare indicator for calculation of poverty and inequality measures. Data used in this study come from Vietnam Household Living Standard Surveys (VHLSS) in 2004 and 2006, which are the most recent nationally representative household surveys.

Regarding the methodology, the study uses fixed-effect regressions to estimate the average effect of credit, transfers and remittances on work effort, income and expenditures of receiving households. The estimation of the impact of credit, transfers and remittances on expenditure poverty and inequality is carried out in several steps. Firstly, we estimate the impact of a program (or an economic flow) on expenditure (using fixed-effect regressions) and construct the counterfactual expenditure in the absence of the flow. Secondly, we estimate a poverty measure or an inequality measure in the state of no-program using this counterfactual expenditure. Thirdly, we assess the impact of the program on the poverty or inequality measure by calculating the difference in the poverty or inequality measure in the presence of the program and the counterfactual poverty or inequality measure in the absence of the program. For migration, which – contrary to the other flows – is defined as a binary variable, we apply difference-in-differences with propensity score matching method instead of fixed-effects regression and otherwise follow the same procedure.

Chapter 4 shows that the impact of governmental credit provided by VBSP on consumption expenditure and poverty is limited. Although VBSP credit is a micro-credit program which is targeted at the poor, the poor receive less VBSP credit than the non-poor. Less than 30 percent of VBSP loans end up in the hands of the poor, which means that up to 70 percent of VBSP loans are obtained by the non-poor. The VBSP program covers only 15 percent of the poor, while informal credit reaches 21 percent of the poor. Not surprisingly, we therefore find that informal credit is more effective in decreasing poverty: it reduces the poverty incidence of borrowers by 1.4 percentage points from 21.1 percent to 19.7 percent. However, the effect of formal credit on total poverty is extremely small and not statistically significant. Regarding VBSP credit, evidence of its effect on poverty is not found. It is possible that the effects of VBSP credit may only be measurable over a longer time period, despite the short-term nature of the loans.

Chapter 5 analyzes the poverty targeting and impacts of public and private transfers. It is found that public transfers do not reach the poor well. Only 14 percent of the poor receive public transfers, while 19 percent of the non-poor obtain these public transfers. In addition, the non-poor receive much higher amounts of transfers per recipient household. Since the non-poor account for a large proportion of the population, they receive around 97 percent of all public transfers. It should be noted that public transfers defined in this study are not limited to transfers provided for the poor. Public transfers can include contribution-based

transfers, e.g. pensions, which reach more non-poor than poor people. Although public transfers increase current income of the recipients substantially, they increase current the recipients’ expenditures only slightly. As a result, the impact of public transfers on poverty is negligible due to low coverage of poor and relatively low amounts transferred to the poor.

Domestic private transfers are much more successful in reducing poverty. They reduce the poverty rate of the receiving households by 2.1 percentage points from 17.8 percent to 15.7 percent. In addition, private transfers also reduce the incidence of total poverty by 1.8 percentage points from 17.8 percent to 16 percent. Decreases in the depth and severity of poverty due to private domestic transfers are quite substantial. This is because around 88 percent of the poor receive private transfers, and private transfers have a high impact on current expenditures.

Chapter 6 shows that international remittances have a smaller effect on poverty reduction. Yet, international remittances lead to a substantial increase in income and also an increase in consumption. Thus, the main reason for the negligible effect on current expenditure poverty is that in Vietnam mainly the non-poor are remittance recipients. Less than 2 percent of the poor receive international remittances. Moreover, it appears that the direct impact of international remittances on per capita consumption is small since a substantial part of international remittances is saved and invested.

In Chapter 7, we show that both work migration and non-work migration have a positive and significant impact on per capita consumption expenditure of migrant-sending households. Increased expenditure due to migration, both work and non-work, leads to a reduction in poverty. It is interesting that non-work migration is more successful in reducing poverty than work migration, because non-work migration covers a larger proportion of the poor and leads to a higher increase in consumption expenditure than the work-migration. Non-work migration reduces the poverty rate of migrant-sending households by 8.9 percentage points from 21.7 percent to 12.8 percent. Non-work migration reduces the incidence of total poverty by 1.1 percentage points from 17.1 percent to 16 percent.

In this study, the empirical findings on the impact of the economic flows on expenditure inequality are mixed. Both VBSP credit and informal credit have a very small and not statistically significant impact on inequality. It is unexpected that public transfers and international remittances increase inequality slightly. Conversely, domestic private transfers and migration lead to a decrease in inequality.

In short, a flow will have a large impact on poverty and inequality reduction if it covers a large proportion of the poor and has a positive impact on consumption expenditure. In this study, the private flows including informal credit, private domestic transfers and migration are found to lead to a reduction in expenditure poverty. In addition, private domestic transfers and migration reduce inequality. Meanwhile, two public policies on micro-credit and income transfers, which are investigated in this study, do not have the expected effects on poverty and inequality. International remittances are not successful in reducing poverty and inequality either. However, we must keep in mind that this study focuses on an evaluation of the short- run impacts. Credit and transfers can be saved or invested and may thus lead to future increases in income and consumption, which is outside the scope of this study.