UNIVERSITY OF ECONOMICS ERASMUS UNVERSITY ROTTERDAM VIETNAM –THE NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS CLIMATE CHANGE AND INCOME DIVERSIFICATION IN THE MEKONG RIVER DE
Introduction
Research problem
Climate change has been the most controversial issue in the world due to its significant impacts on many aspects of society and economy in which agriculture is the most vulnerable sector The variationof climate conditions is reflected through temperature rising, abnormal precipitation, droughts, or floods Thoseare the main reasons for insects, diseases, and crop failures (Zerihun, 2012) Climate change is generally harmful for crop production, but indeed, the impact is much diversified (IPCC, 2014).Specifically, higher temperature shortens the growing period of rice, leading to rice yield reduction; however, in some study the increased CO2 from the pollution has supported the photosynthesis process of some crops such as maize and wheatresulting in a better productivity of cereals In Japan, the increase of
1 o C in the 20 th century has resulted in the drop of wheat, vegetables, milk, and egg production In Russia, the potential production of major crops is acknowledged to fallby 50% on average due to the climate change.On the other side, climate change does notgive identical effects on agriculture sector in different areas in the world due to alternative natural conditions and specific socio-economic characteristics of each region All demographic properties and adaptive solutions of people in an area are the main factors, which determined the vulnerability to climate change.In spite of diversified impacts,it is undeniable that climate change has severely affected food security all over the world
Being the second biggestrice exporter in the world just after Thailand, Vietnam has 90% of exported production derived from the Mekong River Delta Located nearby the final branches of Mekong River before converging into the ocean, Mekong River Delta is the wide fertile area, which is appropriatefor rice paddy cultivation and is known as the biggest rice granary in Vietnam However, in recent years, Mekong River Deltaisseriously exposed to threat of climate change, which is clearly shown in high saline intrusion in coastal areas, droughts, and the shortage of fresh water in dry season, resulting in the restriction of arable land.In particular, according to the projected climate scenario in 2100 of the Ministry of Agriculture and Rural Development, if the sea level risesby 1meter, an approximate of 40% arable land could be sunk in salt water The yield shortfall has significantly caused the income loss for farmers, theincrease of poverty, and the social insecurity at the same time However,overcoming all difficulties of natural conditions, Mekong River Delta still keeps a stable development rate of production
In order to deal with environmental challenge, farmers have applied many solutions to adapt with climate change and improve their lives In those solutions, income diversification is considered as an effective response to climate change (Smit et al., 2000; Bryan et al.,2011) Specifically, income diversification helps farmers to reduce the risk of crop failureand increase household’s total revenue (Zerihun, 2012;Haiwang et al., 2015).Income diversification process is understood as the way in which farmers participate in manyactivities to generate incomefor their households For example, household’s income sources could stem fromgrowing varieties of rice, fruits and other cereals; livestock breeding; aquaculture rearing; or non-farm activities Although income diversification is observed in various levels, researchers still concern aboutthe drivers of income diversification Several studies suggested that drivers are temperature, drought, salinity,price change, and institutional change Understanding separate channels that lead to the farmer’s behavior on diversifying income is important since it allows policy makers to know what to focus on in their policies for farmers Moreover, drivers of income diversification in the Mekong River Delta could be different from other areas and in the world where evidences could be found.Specific evidences for the Mekong River Delta are what policy makers need
In Vietnam, income diversification process, which is considered as an effort to reduce thethreatens of climate change, is favorablyrecommended for farmers by Vietnamese Government.Besides,Government policies also relate to the improvement of physical infrastructure, financial subsidy, and the openness of agriculture market However, both uncertainties about determinants of income diversification and the response of farmers to climate changecould lead to the inefficiency or less efficiency of Government supporting policies Therefore, a research of climate change and income diversification could producereliable and sustainable evidences for policy makers about the impact of climate change on income diversification Based on those empirical findings, policy makers could implement policies, which are more efficient to support farmers in income diversification process.
Research objective
The main objective of this study is to analyze the impact of climate change on the degree of incomediversification Climate change is reflected by the variation of temperature, precipitation, and salinity intrusionin both dry season and wet season.Besides, other socio- economic characteristicsare also investigated to clarify the responses of different households in term of income diversification behavior
Relying on the empirical findings, this study helps policy makersto understandhow farmers diversify their income, the reliable determinants of income diversification, and the behavior of farmers with different socio-economic characteristics to climate change through income diversification Then, policy makers could design current and futurepolicies that are more appropriate for farmers Those policies could reduce the potential risks of a specific conventional agricultural activity due to harmful effect of climate change, maintain and improve the living standard of farmers.
Research scope
This study employs apanel data analysis for 362 households in the Mekong River Delta of Vietnam, which is a coastal areaseverelyaffected by the climate change Most of households participate in the agricultural activities, which are the most vulnerable sectors The time span for the study is the period2010 – 2014 whichdraws an overall picture of the impact of climate change and other socio-economicfactors on the income diversification, a common and effective approach of adaptation.
Thesis structure
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Literature review
Theoretical review
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90 percent possibility of the greenhouse effect intensification, a phenomenon that long-lived gases absorb heat radiated from the earth to space, making the earth surface warmer
The increase of greenhouse gas emission has produced harsh effects to the climate, making the climate change become more and more severe Climate change intensifies potential threats for natural conditions and human society Impact of climate change much diversifiesvia its unequal magnitude for different areas, and depends on vulnerability, sensitivity, and adaptation capacity of affected zones to climate change
First, the temperature increase makes the atmosphere becomehotter and more unpleasant, and promotes the evaporation and precipitation Glaciers and ice in the oceans are remarkably meltedwhen the oceans water becomes warmer, making the sea level rise constantly around the world As a result, storms and floods happen more frequently and intensely The dry and hot weather in some regions has led to an increase of violent forest fires and wildfires over recent decades, destroying the fresh atmosphere and threatening habitats and lives
At the end of the 21 st century, the average temperature increases by about 1.9 – 3.4 o C, the global precipitation increases by 3.3 – 5.0%, and the sea level risesby over 18 – 24 cm in comparison with those of the 1990s (IPCC,2013) The climate change has been the reason for many long-lasting changes in the structure of the Earth surface and the remarkable, pervasive change of the ecosystem in both continents and oceansall over the world The water reserve is harmfully influenced in term of both quantity and quality In detail, fresh water shortage becomes more hazardous, and high saline water gradually encroaches to the interior field Agriculture sector is heavily affected in both cultivation and animal husbandry, for example, cropfailure rises due to drought, insects, diseases and salinity intrusion, soil degradation;increase of cattle dead is caused by droughts or floods
2.1.3 Adaptation of people to climate change
Agricultural system is the combination of biological, physical and chemical agents, while climate plays a key part in influencing all three above processes.The vulnerability of the agricultural sector is determined not only by harmful effects of climate change but also by the adaptive capacity taken by people to overcome difficulties(Marshallet al.,2010)
Parry et al.(2007) gave a definition for “adaptation to climate change”as the “adjustment in natural orhuman systems in response to actual or expected climatic stimuli or their effects, whichmoderates harm or exploits beneficial opportunities” (IPCC, 2007).Adaptation and mitigation areusually considered as the same, but in fact, they are just similar in the purposeaspect Mitigation is the practice to reduce emissions of greenhouse gases, while adaptation is the response to climate change by exploiting new opportunities resulting from climate variation According to Mastrandreaet al (2010), adaptationcould reduce the sensitivity and vulnerability of a society to the impacts of climate change
In agriculture sector, key drivers which determine adaptive behaviors consist of awareness and preferences of farmers (Godfray et al., 2010), the experience to cope with the influences of climate change (Parry et al., 2007; Spies et al., 2011), market signals and government policies (Preston et al., 2011) Besides, inventions and innovations from researches contribute to the determination of adaptation investments because they propose new and effective solutions.The harmonization of those drivers would promote the efficiency of the adaptation solution and facilitate the optimal measure to response to climate variability.One of the most important factors, which affects the adaptation method decision, is the assessment of the costs and benefits achieved from the adaptation response The complicated happening of the climate scenario and the tentative performance of the adaptive process make it difficult to measure the economic effectiveness of the adaptive typology Researchers proposed that the adjustment action would be more efficient if it is taken at large scale (Adger et al., 2007)
Adaptation behaviors are categorized by multi-dimensional aspects such as space or time span, intentionality (active or non-active behaviors), specific purpose (to adjust or reduce susceptibility), the performer (individual, household, enterprise or government), the outcome (increase heat tolerance or remain income), or approach(physical or technological measure) Adaptation behaviors could also be the combination of many abovementioned attributes(Smit et al., 2002; Adger et al.,2007).Because of the complex and ambiguous happenings of climate change, adaptation solutions should be taken at multiple dimensions, requiring the collaboration of many participants including farmers, researchers and policy makers
The vulnerability of the agricultural system strongly depends on human behaviors to adjust with the climate change Therefore, the mission to improve the adaptive capacity of agriculture is very necessary to intense the resilience of the system This process is implemented through improving the awareness of socio-economic and biological determinants of the adaptive capacity, evaluating the costs and benefits of the response, assessing the social and technological feasibility and resource limitation All the adaptation strategies focus on the objective of developing a sustainable agriculture economy
The designation of a typology of adaptation strategies is rather complicated due to the dynamic and complex relationship between the climate change, the agricultural system and the limitation of natural resources The typology of adaptation behaviors is described obviously in the case of Smit et al (2002), in order to response to the variability of climate conditions The rising of seasonal temperature and reducing precipitation are determined as the key drivers of adaptive strategies In term of farm production, farmers are encouraged to switch cultivars, change planting dates, use drought resistant crops, and build irrigation system In the aspect of financial management, economists suggest that farmers should engage in crops insurance, invest on crops shares future, or diversify their income generating activities Regarding to farm infrastructure, the installation of the water management, irrigation system, and weather forecast systems are essential Concerningscientific researches, demands for studying drought tolerant crops, accurate weather forecasting or abnormal climate phenomenon areproposed Among many actors, government plays a major role in planning and supporting the most effective and appropriate adaptive strategies through subsidy, government insurance, market connection or investment on technology
Among many adaptation strategies of the agriculture system to climate change, income diversification is assessed to be one of the most effective approach, which is suitable for almost conditions Diversification could be implemented in scope of farms by expanding crops, engaging in more sources of farm income (animal husbandry, aquaculture), or participating in non-farm activities Income diversification is highly appreciated by its efficient financial management aspect, which presents by the ability to prevent excess loss due to harmful impact of climate change Due to the convenience and efficiency aspects, income diversification is greatly encouraged by policy makers when establishing adaptation typologies
2.1.4.1 Definition and classification of income diversification
Income diversification is defined as an effective adaptation method in which a household engages in a portfolio of different income sources, including farm income, off-farm income, and remittances (Kelly &Adger, 2000; Mendelsohn, 2000; Ellis, 2000, Minot et al., 2006)
In term of farm-scale activities, Smit et al., (2000) referred two types of farm income diversification, including geographic diversification and crop diversification First, geographic diversification needs a large area for integration many crops inside, requires a high expense for fertilizers, labor, and management, and is just suitable for immense zone In the comparison with geographic diversification, crop diversification is assessed to be more suitable in case of limited labor and arable land, and is more favored due to its high economic effectiveness Crop diversification introduces growing more short-day crops that could tolerate severe natural conditions (high salinity or droughts) and could enhance the soil quality and maintain moisture for land beside the main crop (e.g rice, wheat) Diversified crops with different harvest stages are grown in rotation, and help farmers to take benefit from using land most efficiently.Moreover, farm income diversification also consists of livestock breeding and aquaculture to take advantages of products from cultivation and create additional value for farm activities (Bradshaw,Dolan, &Smit, 2004)
Besides farm activities, more and more farmers have tendency to involve in non-farm activities, which are not volatile and independent on the abnormal weather Non-farm activities develop together with the growth of infrastructure (Escobal, 2001; Lanjouw, 2001) Building new roads and expansion of water supply and electricity network have opened new opportunities for the market economy,supported processing industry and services, and provided hundreds of jobs for people in rural areas
Empirical review
2.2.1 Impact of temperature and precipitation variation
Seo and Mendelsohn (2008) have made a breakthrough in the history of researching the way to switch crops to adapt with climate change In previous studies, researchers only focused on the harmful impact of severe climate on a specific crop yield The crop failure makes the revenue of farmers drop down significantly, and the quantitative method by using Ricardian model is often estimated to evaluate the effects However, in reality, farmers always try their best to adapt by switching main crop to alternative crops that could sustain harsh natural conditions By observing these adaptation behaviors, Seo and Mendelsohn (2008) conducted a research on the farmers’ crop choice on South America by using a multinomial logit model
By collecting data from 949 farmers in seven countries, that study indicates a relationship between farmer’s choice with both precipitation and temperature Farmers have tendency to grow fruits and vegetables rather than maize and wheat to cope with the global warming Wetter climate is more suitable for potatoes, rice and fruits, whereas dry climate seems to be appropriate for maize and wheat Study also indicates that farmers switch to not only a single crop but also a combination of multiple crops at the same time, as well as reaching the goal to maximize their profits
Similarly, in a study about African farmer’s behaviors in livestock management, Seo and Mendelsohn (2007) showed that the choice of income diversification much depends on climate change Three econometric models have been used to investigate the farmer’s performance First, primary choice multinomial logit model is applied to find out the most profitable livestock species Second, the optimal portfolio model is used to investigate the possible portfolio of livestock that farmers feed together Finally, the demand system multivariate probit model is regressed to check the probability of choosing specific species The research is performed in ten countries with a data collection of 9000 households, and has revealed that farm options always correlate with the variation of climate change Farmers prefer crops to livestock under cool temperature and high moisture climate When the temperature increases, farmers tend to choose goat and sheep rather than beef cattle and chicken With higher precipitation, goats and chicken are more chosen than cattle and sheep because the goats and chicken favor forest, which is more popular than savanna in wet weather Furthermore, the study simulated the models based on climate scenarios, and gave results that livestock would continue to develop in warm and dry climate, but would decrease in case of high precipitation, and heat tolerant species would be dominant in African in future
One of the most important drivers of income diversification is the high vulnerability of the agriculture In Southern Ethiopia, the arid climate is a great challenge to the livestock production due to detrimental effect on water shortage; wither pasture, hot weather, and disease risk.Megersa, Markemann, and Ay (2014) made a survey with 242 households in two provinces Dike and Yabelo A set of data about socio-demographic properties such as family size, gender and education level of household head, and livestock holding behaviors is collected through interview process directly each household The study focused on five most common species in the region, including cattle– the most dominant species, camel, goat, chicken, and donkeys Livestock diversification is assumed to recognize when the household has at least three species The participants are asked about the tendency in livestock holding when there are changes in temperature, precipitation, and drought The study used linear regression to estimate the impact of climate variables on livestock adoption, with the ranking model to rank the livestock priorities, and then logit model to measure the probability to select livestock alternatives from the most to the least
Through evaluating the tolerance of each species by measuring the average mortality of livestock in the drought, they find out that cattle is the least adaptive species in 4 kinds of species, while camel and goat have more ability to suffer the water scarcity and food shortage Analysis of rainfall and temperature in long term has indicated that the frequency of droughts has increased remarkably, making the annual precipitation reduce much, while temperature only changes slightly on average Therefore, livestock diversification is evidenced to be negatively correlated with precipitation, but seems to be not meaningful with the temperature
By contrast,Brenshaw, Dollan, and Smit (2004) showed an opposite farming option of farmers in Canadian prairies compared to previous studies That study is conducted by estimating cropping behaviors of farmers during a long period 1994 – 2002 The average number of crops in the period is recorded for each prairies farms, and Herfindahl index is used to measure crop diversity level Researchers believed that cropping diversification is a useful adaptation method to reduce risk from climate change In contrast to researchers’ expectation, the study shows that farmers have tendency to specialize in their cropping rather than diversification The reason for this matter is that Canadian prairies confront many difficulties and limitations in diversification The start-up cost is high, the ability to catch up new technologies in producing new crops is limited, and the benefits reduce due to economies of scale Another interesting finding from the research is that farmers feel more likely to diversify income sources rather than crops switching Off-farm activities are preferable selections of farmers to reduce challenges from climate risk and other economic risks
2.2.2 Impact of high salinity intrusion to income diversification:
The two most common threatens to the coastal and low-lying delta are the seawater inundation and the increased salinity in the soil and underground water, which adversely influence on agriculture
IPCC (2014) proposed many adaptation measures to respond with salinity intrusion, in which new and diversified livelihood seems to be the most important method Shannon
(1997) emphasizes the importance of researching the threshold of salinity tolerance of each plant before selecting plants for the coastal area According to the study, barley and wheat are higher salinity tolerant than rice and corn Cotton and sugar beet have higher degree of saline than bean, pea and potato In the oil seed group, sunflower, linseed and soybean are more sensitive to salinity than canola and safflower Fruits and citrus are not popular in the condition of saline area Bithal et al (2011) suggested that crop varieties in the coastal and low-lying delta should enhance the ability to resist to drought, heat and salinity Pitmann and Michael (2002) recommend genetic engineering as the effective approach to make plants endurable with high salinity and even be irrigated by brackish water Besides, Ahmed (2010) and Khan et al (2012) introduced other adaptation methods including non-rice crops in floating gardens, or exploiting small-scale fish and other aquacultures on inundated land
In Vietnam, as an obvious illustration for the risk of salinity intrusion, Mekong Delta has coped with detrimental effects from this phenomenon in recent years, especially in the dry season Seawater could intrude 40-60 km from the coast (Miller,2003), leading to the fact that millions hectares of arable land have been highly saline Crops failure happens more frequently, the agricultural production is strongly affected in both quantity and quality
Binh (2015) measured the vulnerability to salinity intrusion of Mekong River Delta in the period 1995 – 2011 by using both the quantitative and qualitative methods Result of the study showed that the rate of intrusion becomes more and more rapidly and widespread in the years later By a survey of 512 households in TraVinh, researchers indicated many adaptation methods, which are applied in this zone to cope with the hazard, including dyke building, crop rotation, and ground water management Many previous studies asserts that dyke system has developed to prevent floods and salinity intrusion, so that farmers could rise into 2 to 3 crops per year, contribution to the increase of rice production (Hoanh et al., 2003; Tuonget al., 2003; Can, 2005) De et al (2002) introduced new short day and high saline tolerant rice varieties, promising that these crops would be well appropriate with the coastal area
From 2000, the Vietnamese Government promoted policies for rice quality upgrade, integrated system of rice, fish or shrimp in order to induce the benefit from agricultural products, including crops and aquaculture Farmers in coastal zone has tried and succeeded with the rice – shrimp farming, taking advantage of both floods and brackish water to raise their income (Brennan et al., 2002) The system is a combination of the dry season for rice cultivation and the wet season for shrimp farming This model helps farmers to reduce risk of shrimp mortality or crops failure in the adverse climate, and satisfies household consumption Being opposite toPhong et al (2002) and Brennan et al (2002), De et al (2002)suspectedthe high revenue efficiency of rice shrimp system due to salt leaching They presented evidence that yield would be higher in the rice monoculture system
However, almost adaptation measures are not carefully taken into consideration for the long term impact of sea level rise The vulnerability to salinity is different between distinctive regions, especially between dyke and semi dyke protection regions Renaud(2015) proposed some other adaptation methods besides advanced crops varieties, that is maintaining the agri-ecosystems by managing river flows, infrastructure development, improving the degraded areas These solutions are assessed to be long term strategy in adaptation to climate change, and should be encouraged and directed by the government to develop the Mekong Delta
2.2.3 Impact of socio-economic characteristics on income diversification
When considering the vulnerability to the global warming problem, many researchers concern about social and economic factors Kelly andAdger (2000) proposed four measures to response to harmful effects relevant to human communities caused by climate change, consisting of poverty reduction; maintaining the security, income diversification to disperse risk, and protecting property management rights
The vulnerable state of agriculture depends much on the economic power of a country A developing country with poor living standard, less-developed infrastructure, low educational level and inefficient policies are incapable of doing many strategies to adapt with detrimental effects of climate change (Zorom et al., 2012; Kelly & Adger,2000) Zorom et al (2012) conducted a research about adaptation in Sahel, one of the poorest country in the world The research was performed mainly by survey process with direct interview of hundreds of farmers in Sahel Grain growers and livestock breeders are more vulnerable than off-farm workers and gardeners Severe climate seems not to correlate with the off-farm workers activities Grain growers are traditional farmers with the major grain crop, which is need much rain-fed, so become the most vulnerable groups The most commonly strategy of farmers to adapt with droughts in this area is combination of growing dry-tolerant vegetables and short cycle varieties Although Sahel farmers know that income diversification is the best way for them to reduce vulnerability and react with the severe climate, they meet many difficulties and barriers in achieving capital investment and suitable policies from government
Megersa, Markemann, and Ay (2014) concluded that livestock diversification is significantly impacted by family size and per capita holdings of cattle, while other socio – economic seems to be insignificant, meaning that livestock diversification depends much on labor and income source from cattle keeping
Research methodology
Analytical framework
Based on theoretical and empirical literature review, an analytical framework is built to clarify the motivations and determinants of income diversification of households in Mekong River Delta (Figure 3.1)
Climate change is a phenomenon caused by long-term effects of natural change and human activities, in which over 90% of the reasons belongs to human activities The impact of climate change on the agricultural activities is diversified and depends on the characteristics of specific area Because Mekong River Delta is a coastal delta with low elevation, climate change could be described through changes of temperature, precipitation and salinity intrusion In particular, the weather becomes hotter, dry season lasts longer, rainfall reduces remarkably, fresh water is scarce and the salinity intrusion gradually happens harshly, creeping far interior Being a rice bowl of the country with over 50% of national rice production, the Mekong River Delta is severely affected by climate variation Crops failure happens more frequently due to abnormal weather, and leads to the significant rice yield drop Government has oriented farmers many adaptation approaches to response to climate change In which, income diversification is encouraged and applied by many households Farmers in Mekong River Delta often incorporate rice cultivation, other crops cultivation, livestock and aquaculture breeding, and non-farm income The combination of these activities helps farmers to disperse risk of traditional rice cultivation, and optimizes their earnings in bad conditions caused by climate change.
Methodology
The income diversification degree is represented by one-sided or two-sided proxies To make an overall and accurate assessment of the impact of climate change and other determinants on income diversification behaviors of households, the study applies both measurements in the regression, the one-sided and the two-sided index groups
The first income diversification index is the number of income sources, representing for the one-sided group It is the simplest method to calculate the diversification degree, with the integer value range from 0 to 4, corresponding with the participation in 0 to 4 income generating activities The higher the index is, the more diversified the household becomes Thus,
DI it m where m is source of income, and m is from 0 to 4
The second income diversification index is Herfindahl index, which stands for the two- sided group (Ben, Holly,& Barry, 2004) Herfindahl index is first used to measure industry concentration, contributing to assess the oligopolistic status of an industry Based on the nature of quantifying the diversity degree, Herfindahl index was developed to calculate the income diversificationgradation This type of index reflects both dimensions of diversification: the income sources and the distribution of each income source in total Specifically,
P m m1 where P m is the proportion of m th net income in the total income of households The Herfindahl index has continuous value, ranging from 0 to 1 The nearer to 1 the index is, the less diversification farmers participate
Due to the difference between two methods of measuring income diversification degree, the study has to use two distinct models to estimate the impact of climate change and other determinants on income diversification The panel Poisson model is applied for the first index, while the panel Tobitmodel is a more suitable option for the second index
In order to adapt with the climate change, rural households in Mekong River Delta rely on many activities which could be classified into four main income sources including rice cultivation; planting other varieties such as fruit, sesame, soybean, and coconut; livestock and aquaculture breeding; and non-farm income
The general model is estimated as follows:
DI it K it S it i where DI it is income diversification index of household i in year t K it represents climate variables including temperature, precipitation, and salinity levelof household i in year t S it refers to some controlling variables related to farmers characteristics such as gender, age, educational level of household head, household size, labor ratio, migration status, and land area owned byhousehold i in year t Then, the estimation methods of both panel Poisson model and panel Tobit model are figured out in order to prove the existence of critical point of
The regressand in the first model is the number of income sources with integer value from 0 to 4 It has the form of count data and follows Poisson probability distribution Specifically,
0,1, 2, y i ! where i obeys the log linear model, and ln i x i Moreover, i is proved to be the mean or expected value and the variance of thePoisson distribution, due to the transformation:
x i The parameter could be estimated by the maximum log-likelihood function:
The first derivative of the log-likelihood equation is:
The Hessian is always negative, so could be estimated when the equation gets the maximum value.The prediction is ˆ exp(x ˆ ) The estimated variance of the prediction is i i ˆ 2 '
i x i Vx i , in which V is the estimated covariance matrix for
Since the dependent variable Herfindahl index ranges continuously fromzero to one, a double censored regression model, in particular a two-limit Tobitmodel (Tobin,1958) is used to analyze the determinants of income diversification The index of the i th household at year t in the sample is regressed on independent variables that changes by time for each household y * is a latent variable indicating desired Herfindahl index while y it is the observed Herfindahl index The error term v i follows the standard normal distribution The correlation between the observed and latent variable is as below: y * ' x u with i 1, 2, , n; t 1, 2, ,T it it it i u it v i it y 0 if y * 0 it it y 1 if y * 1 it it y y * if 0 y * 1 it it it
x The log-likelihood of the censored model is:
After taking first and second derivatives of log-likelihood function respect to , it is regconized that the Hessian of the function is always negative This means that the log- likelihood could reach the maximum value, and at that point, the could be determined
Table 3.1 gives a brief description of variables, which are incorporated into the model Dependent variables include two types of income diversification index Independent variablesare classified into two groups.The proxies of climate change includescaled salinity, and the average value of temperature and precipitation in the dry season and wet season and its quadratic form The controlling variables group includes socio-economic characteristicssuch as age, gender, educational level of household head, household size, household’s labor ratio, land area, and migration status of the household
Variable Denotation Unit Description Expected sign to diversification behavior
Income diversification index1 diversity_index1 Number of income sources: 0,1,2,3,4
Equal sum of square of the net revenue from each Income diversification index 2 diversity_index2
Climate change income source in the total income, and continuous from 0-1
Average temperature in the dry season dry_temp o C +/-
Average temperature in the wet season wet_temp o C +/-
Average precipitation in the dry season dry_precipitation mmHg +/-
Average precipitation in the wet season wet_precipitation mmHg +/-
Square of average temperature in the o 2 dry season sqr_dry_temp C +/-
Square of average temperature in the o 2 wet season sqr_wet_temp C
Square of average precipitation in the 2
+/- dry season sqr_dryprecipitation mmHg +/-
Square of average precipitation in the 2 wet season sqr_wetprecipitation mmHg +/-
Variable Denotation Unit Description Expected sign to diversification behavior
Age of household head age year old +/-
Household size hh_size member +
Household’s labor ratio hh_labor_ratio % +
Number of migrators in a household migration member +/-
=2: secondary level Educational qualification of household head education =3: high school level
Gender of household head gender =1: male
Land area of household landarea hectare +
First, it is necessary to describe two popular proxies of climate change, which are temperature and precipitation The variation of the average seasonal temperature and precipitation through years between different zones are recorded and added to the estimation
It is believed that the severe climate with high temperature, drought, and scarcity of rainfall could be the push factor for farmers to diversify their activities (IPCC, 2007) The quadratic forms of temperature and precipitation are used to assess the impact of climate change in long term
The group of socio-economic characteristics of household includes gender of household head, education level of household head, age of household head, household size, household’s labor ratio, land area of household, and migration level of household Gender is a dummy variable that defineshousehold head is male or female Gender is equal to 1 if the household head is a male, 0 if otherwise It is difficult to find the correlation between gender of household head with the capacity of diversification However, it is expected that men would be more fearless of trying new crops or new income generating activities compared to women(Kimsun&Sokcheng,2013)
Educationvariable represents for the educational level of the household head That variable is a categorical variable in which 0 corresponds with the level below the 5 th class, 1 is respective with completing primary level, 2 equals finishing secondary school, 3 corresponding with passing high school level, 4 is college, and 5 is equivalent to university graduation It is believed that a higher-educated head could have more opportunities to diversify their income, approaching new technology of other farming activities beside their traditional crops cultivation as well as participating in non-farm activities (Nhan et al.,2012; Reardon et al., 2000;Minot et al.,2006) On the other hand, some points of view indicate that a qualified household head could be more proficient in their traditional activities and focus on agricultural specialization to increase their profits Therefore, the effect of educational qualification of household head on the diversification level of household is mixed
Data sources
The study primarily uses the dataset of Vietnam Household Living Standards Surveys (VHLSS) This is a biennial survey program provided by General Statistics Organization(GSO) under the technical assistance from UNDP and World Bank With the nation-wide scale, the survey provides detailed information at households and communes level of 64 provinces through direct interview approach The investigation is strictly conducted by carefully trained enumerators Respondents are interviewed face to face a carefully designed questionnaire covering many varieties of social economic aspects The core content of the survey is concentrated on the income and expenditure information of individuals and households Besides, education, health status and many other demographic characteristics are incorporated into the survey Over many years, results from VHLSS database processing have greatly contributed to the social economic policy planning of the government
With the study site at Mekong River Delta, the dataset limits in 13 provinces including Long An, Dong Thap, Ben Tre, Vinh Long, Can Tho, TienGiang, HauGiang, KienGiang, An Giang, SocTrang, TraVinh, Bac Lieu and Ca Mau The aim of the empirical study is to assess the effects of climate change on adaptation behaviors of households by income diversificationin the period 2010 – 2014 Specifically,362 households who could satisfy the requirement of completing all three surveys of GSO The ultimate sample incorporates 1086 observations of 362 households scattering around 13 southern provinces in 2010, 2012 and
The income diversification represents by the participation in many kinds of activities to generate income In Mekong River Delta, there are four major income sources, which could be observed, include income from rice cultivation, other crops cultivation,livestock and aquaculture husbandry,and non-farm activities Dependent variable of the empirical study is calculated by two ways The first index issimply measured by the number of income generating activities that a household participates The second index is calculated by taking the sum of square of each net income source in the total income of the household The net income of the household in an economic sector is accounted by extracting relevant expense from its revenue.Other controlling variables reflecting socio-economic characteristics such as household size, household’s labor ratio, educational level, gender and age of the household head, migration status and land area of the household are also explored in the VHLSS
The study site constitutes an immense area of 390,000 km 2 and 740 km along the coastline Mekong River Delta is characterized by tropical monsoon climate, but includes many distinct ecological regions in which climatic properties of each region seem to be greatly different from the others In this study, climatic variables include temperature and precipitation, which are recorded at 10 meteorology stations across the Mekong River Deltawith available figures posted in the statistics website of The Ministry of Agriculture and Rural Development (MARD) Climatic data is collected by months per year at each station The South of Vietnam has two seasons including rainy season extending from May to November, and dry season lasts the other months Temperature and precipitation used for the study are measured by taking the average of each season Climatic variables of a household are attached with the climate figures of the nearest meteorology station.
Salinity measurement
Salinity data is collected from the Vietnam Institute of Meteorology, Hydrology and Climate Change With 8 over 13 provinces along the coastline, the salinity intrusion performs severely in many regions of the delta Saline water intrudes inland through estuaries, rivers and canals Salinity stations are located along Tieu, Dai, Ham Luong, Co Chien, CungHau, Dinh An, Tran De, Ong Doc, Cai Lon estuaries (Figure 3.2) There are 29 stations along the coast with detailed longitude and latitude Their co-ordinates are reflected on the map of Mekong River Delta and marked carefully
Salinity concentration (salinity) is measured by specialized sensor instruments, then signals are transmitted automatically to the receiving and processing data center The statistical figures are recorded every two hours daily from February to May, the peak period of the dry season with serious phenomenon The raw figures are used to calculate the average, max and min salinity concentration In scientific researches, the maximum salinity concentration is the most important and interested figure, because it affects directly the sustainable ability of crops or creatures For example, the saline threshold of common rice is
4 g/L, some salt tolerant rice could endure higher salinity, but the yield would reduce 20-50% depending on the growing stage When the salt concentration is over 6 g/L, almost rice would completely die However, the saline threshold of aquaculture is higher than crops Catfish could live at salinity up to 12 g/L, while shrimp grows best at the saline environment 15-25 g/L (Giới thiệu hệ thống quan trắc và xâm nhập mặn,2016).That is the reason why the salinity could be regarded as a motivation for the income diversification to reduce risk from production failure
The salinity statistics are available at each station, however, the location of the household plays an important role in determining the saline level As report of the Water Resource Directorate, at regions in the radius of about 45 km far from the coast, fresh water source is very scarce, not enough for production and daily activities At zones far from the sea around
45 to 65 km, the ability to be saline higher than 4 g/L is very high The distance 70 to 75 km from the sea is considered to be the safety zone to be protected from salinity intrusion The sphere of influence increases by years, gradually far inland
This study is the first in Vietnam to develop a new measurement to convert the salinity at the nearest station to the salinity at each specific position The measurement method is developed from Dasgupta et al.,(2015), however, due to the limitation of available data, the study has to use a simple method based on the distance from the household location to the nearest salinity station to re-estimate the specific salinity It is recognized that the greater the distance is, the lower the impact would be For the distance not over 30 kmfrom the station, the salinity is almost unchanged For the distance from 30 to 60 km, 60 to 90 km, salinity reduces about 30% and 60%, respectively For the distance over 90 km, the salinity remains only 10% of the origin The scaled salinity is assessed to be more accurate in estimating the total impact of salinity intrusion at a specific household.This variable takes account not only the saline intrusion affected zone but also the salinity level at the nearest station
Figure 3.2 Salinity stations in Mekong River Delta
This chapter firstly gives an overview of the Mekong River Delta, the study site which is heavily affected by consequences of climate change Then, results of the empirical estimation are introduced and analyzed in detail to clarify: (1) determinants of income diversification strategies; (2) the relationship between climate change and income diversification
4.1 rview of the Mekong River Delta
4.1.1 Geographical position and natural conditions
Mekong River Delta locates in the Western South of Vietnam, with two sides contiguous to the Eastern Sea The total area is over 3.9 million hectares The delta is divided by two final branches of the Mekong river (Bassac or Hau River and Tien River), with hundreds of small branches and canals across the terrain There are 13 provinces responsible for administrative management in the area, including Ben Tre, Long An, Vinh Long, TraVinh, SocTrang, TienGiang, Can Tho, Dong Thap, Bac Lieu, An Giang, Ca Mau, KienGiang, HauGiang Mekong River delta has a flat and low-elevated terrain, with the average elevation just about 3-5 meters above the mean sea level, some places only 0.5-1 meters above In the rainy season, upstream floods flows into the delta up to 3meters depth, making a large area submerged in water, especially the Plain of Reeds and the Long Xuyen Quadrangle In the dry season, the low river flow causes high salinity intrusion over a widespread coastal area
Agriculture sector plays a dominant role in the economy of Mekong River Delta With the advantages of large area, fertile soils, abundant fresh water supply, the delta has a competitive rural economy with high production of rice, about 50% of the national rice yield, contributing to the second-ranked exporter of Vietnam in the world Moreover, this region also promotes the capacity of growing fruit orchards and vegetable crops Along with cultivation, the aquaculture grows rapidly with increasing production of brackish water aquaculture, especially shrimp and catfish, contributes to the high GDP shares totally.Besides farm activities, the rapid growth of industrialization and modernization has promoted the non-farm sector, increased the ratio of industry and services contribution in GDP, which is described in Figure 4.1.Over the time, industry and services sector likely comprise larger share oftotal GDP, while agriculture sector comprises less share of total GDP
Figure 4.1 GDP share per sector in Mekong River Delta
4.1.3 Impact of climate change on The Mekong River Delta
In Vietnam, the impact of climate change is predicted based on three scenarios of Monre
(2009) Until the end of the 21 st century, the projected average temperature could increase by 1.1 – 1.9 o C (low emission scenario B1), 1.6 – 2.8 o C (average emission scenario B2), 2.1 – 3.6 o C (high emission scenario A2) Rainfall has tendency to decrease in the dry season, but rise in rainy season On the average, precipitation could increase by 1 – 5% (B1 scenario), 1.5 – 8% (B2 scenario), or 2 – 10% (A2 scenario) The sea level rises by at least 65 cm, and the highest 100 cm compared to that of the period 1980 – 1999 Thus, with such the dramatic variation of climate condition, the unexpected effects of climate change would be more severe in many economic sectors, especially agriculture sector
The Mekong River Delta is among the five most vulnerable deltas in the world by the climate change, especially the sea level rise (IPCC,2007) In the scenario of sea level rise built for this region, in the middle of the 21 st century, the sea level rises about 22 – 30 cm At the end of the century, the sea level rises up to 51 – 66 cm, 59 – 75 cm and 79 – 99 cm in corresponding with the low, medium and high emission scenario The flat area of the region could be inundated permanently in the wide scope, ranging from 12.8 – 37.8% of the total area If the sea level rises about 1meter, 70% of rice area in Mekong River Delta will be inundated, which means that the area for rice growing could lose up to 1.5 – 2 million hectares Besides, the abnormal change of weather and severe droughts induce pest, insects and diseases, causing crop failure as well as making difficulties for the preservation and processing of farm products, which threatens severely the food security of the whole region For example, 1 o C increase could result in 10% reduction of rice yield and 5– 20% reduction of bean-origin farm trees yield The harmful impact of climate change is now urgently warned by environmental specialists
The Mekong River Delta could be divided into three ecological regions (Figure 4.2), which confront different challenges from effects of climate change, include:
1) Upper Delta – facing seasonal fluvial floods and increasing the ability to keep water via optimal land and water use
2) Middle Delta – facing the heavy fresh water shortage in dry season and, droughts and ensuring enough water supply;
3) Coastal Delta – facinginundation with excess salinity intrusion and brackish water
Among many risks, in recent years, the salinity intrusion and drought have been the most dangerous threatens to the livelihood and agricultural activities of the Mekong River Delta Thousand hectares of rice cultivation have been lost, the hazard of fresh water shortage for daily activities and for production has been more severe
Figure 4.2 Regional division of Mekong River Delta
4.2 Salinity intrusion in Mekong River Delta
All the provinces of the coastal zones at Mekong River Delta are coping with severe saline intrusion This phenomenon often occurs heavily in the dry season, when the river flow at lowest level and insufficient river discharge Salt water intrudes inland through the dense network of numerous canals, ditches and waterways (Hashimoto, 2001)
Figure 4.3 The salinity intrusion map of the Mekong River Delta
The extent of saltwater intrusion mainly depends on six factors: water flow from the Mekong riverhead, water reserve in the flood season, the sea level rise, the situation of exploiting water for usage, and the shape of the riverbed at estuaries and the happenings of the wet season (Figure 4.3) First, the construction of many hydroelectric plants at the upper Mekong River reduces remarkably the water flow to the lower section Second, in these two decades, floods in Mekong delta decline gradually and tend to halt soon in the early November due to the natural conditions and the manipulation of lakes in the riverhead The capacity of reserving water in the flood season decreases a half in recent years Third,the sea level rises high from December to January, and lower from July to August Because of the sea level rise, the crest of tide has tendency to be higher and higher, about 20 – 25 cm
Fourth,the over exploitation of the water for cultivation and aquaculture leads to the severe reduction of the fresh water discharge Fifth,the shape of riverbed determines the salt water intrusion extent Because of the scarcity of floods, the alluvium consolidate the estuaries zones decreases noticeably, leading to the fact that the riverbed at estuaries erodes more seriously and the salt water intrudes easier Finally,the final factor is the late rainy season occurrence Normally, the wet season starts from the end of April, but in recent years, rainfall is just high after July Connecting allabovementioned reasons, the salinity intrusion trends to be farther inland and leaves not forecasted impacts (Nguyen, 2016)