Persistent Poverty in Rural Vietnam: Differential Asset Dynamics and the Role of Ethnic Minorities

Vietnam has achieved remarkable progress in reducing poverty over the last decades. However, households mainly engaged in agriculture, ethnic minorities, and households in remote areas are still more likely to be poor. Our paper assesses whether poverty can be expected to be persistent for certain types of households in rural areas. We first estimate the asset-based income to describe structural poverty and find that the latter is declining overall, consistent with country-wide trends on income and multidimensional poverty reduction. Second, based on the asset-based income as proxy for assets, we estimate the asset growth path for ethnic minority and majority households by non-parametric and parametric approaches. We find no signs of a general multiple equilibria poverty trap as all households, when considered jointly, converge to levels of welfare above the poverty line. However, the results of an unconditional quantile regression indicate that a large fraction of ethnic minority households converges to welfare levels below the poverty line. Our results point to the need for improvements in the remote areas inhabited by these households, enabling them to make full use of their available labour and benefit more strongly from education.