IMPACT OF REMITTANCES ON AGRICULTURAL PRODUCTIVITY,LIVELIHOOD STRATEGY AND RICE HOUSEHOLD INCOME A new evidence from rice household in rural Vietnam ABSTRACT This study quantifies the i
R ationale
Migration is a crucial factor in a country's socio-economic development, with migrant remittances playing a significant role in enhancing household economic growth The rising inflow of remittances has garnered attention from researchers and policymakers alike, highlighting the need to understand their long-term impact on economic growth This understanding is essential for fostering economic development both globally and within national economies.
Previous research on migrant remittances has primarily concentrated on three key areas: the direct effects of remittances on income distribution and individual well-being, the influence of remittances on international trade and a country's economic balance, and their role in national economic growth Studies in the first area highlight how remittances can enhance individual happiness and income equity The second area explores the implications of remittances for international trade dynamics and economic stability Lastly, research focusing on national economic growth emphasizes the contribution of remittances to overall economic development Each of these research domains offers valuable insights for policymakers and contributes to a deeper understanding of economic growth.
Numerous scientific studies have explored the relationship between remittances and income distribution, particularly among households reliant on rice cultivation However, there is a notable gap in research regarding the role of remittances in educational investment for engaging in productive activities beyond daily expenses This article aims to examine the impact of remittances not only on the primary income sources of households but also on other income streams, while considering essential expenditures such as food and labor costs to provide a comprehensive understanding of household financial dynamics.
R easons OF C hoosing THE T opic
Vietnam serves as a significant case study for examining the interplay between migration and the agricultural economy, particularly in terms of agricultural production efficiency, rural household livelihoods, and income sources Since the late 1980s, Vietnam's economy has experienced rapid growth, with an average annual GDP growth rate of approximately 7% from 2004 to 2014 (Do et al., 2019; Tran et al.).
Agriculture is a vital economic sector in Vietnam, employing approximately 40% of the working-age population Despite this significant workforce contribution, the sector generates less than 20% of the national GDP, highlighting the challenges faced in agricultural production (Nguyen, 2012; Huy & Nguyen, 2019; Nguyen et al., 2021).
The share of agriculture in Vietnam's GDP has declined, while the industrial and service sectors have seen rapid growth, leading to increased labor demand in urban areas (Cuong & Mont, 2012; Le et al., 2018; Taip, 2017) This shift has resulted in a significant migration of people from rural regions to urban centers, particularly in Hanoi, Ho Chi Minh City, and the industrial zones of Binh Duong and Dong Nai provinces (Amare & Hohfeld, 2016) Vietnam is experiencing substantial internal and international migration, with approximately 8.5% of the population changing residence between 2004 and 2009, and around 3.2 million Vietnamese living abroad (Cuong & Mont, 2012) These expatriates contribute significantly to the economy by sending remittances, which totaled 11 billion USD in 2014, representing about 6% of the country's GDP (Hung, 2022).
In Vietnam, the migration of individuals from rural households to urban centers and developed countries has emerged as a vital livelihood strategy This movement not only helps alleviate overpopulation in rural areas but also boosts remittances for the families of migrants However, it is essential to assess the extent to which this migration affects the livelihoods and income sources of those remaining in rural communities.
R esearch Q uestions
Do remittances from migrants impact agricultural production efficiency, livelihood strategics and incomes of rice households in rural Vietnam?
Will remittances from migrants change the income from rice and other incomes of rice households in rural Vietnam?
R esearch M ethodology
Our study utilizes household data from the Vietnam Access to Resources Household Survey (VARHS) to analyze agricultural productivity and income in rural Vietnam We develop two key indicators to measure agricultural productivity, while assessing non-agricultural performance through the diversity of non-farm workers Employing a fixed-effect model, we estimate the effects of migration and remittances on these agricultural outcomes, providing insights into the economic dynamics in rural areas.
1.5 Objects and range of Research
This study analyzes data from the Vietnam Access to Resources Household Survey (VARHS) conducted in 2014 and 2016 By utilizing a dataset comprising 2,668 households, we effectively compare the findings from these two years to assess changes and trends in resource access.
Research makes a unique contribution in three ways First, this study uses more up-to- date household survey data (Vietnam Access to Resources Household Survey 2014 and
This study analyzes the evolving patterns and impacts of migration and remittances in Vietnam, highlighting their dynamic nature over time Unlike previous research that often focused solely on either migration or remittances, this study examines both aspects and their effects on household outcomes, including agricultural productivity, livelihoods, and income levels By exploring these diverse impacts, the research aims to offer a comprehensive understanding of how remittances from migrants influence agricultural production efficiency and the overall income of households with migrants.
This research paper is structured to provide a comprehensive analysis of the relationship between remittances, agricultural production efficiency, and household income sources, addressing gaps identified in previous studies It includes a discussion of empirical strategies and a detailed description of the data used, followed by the presentation of key results and findings The final section offers policy implications and concludes the study.
Migration refers to a permanent or semi-permanent change of residence, encompassing various distances and types, including both voluntary and involuntary movements It includes both international and internal migration, highlighting the diverse nature of this phenomenon.
Migration is influenced by specific rules and is driven by two main groups of factors: push factors and pull factors Push factors, as identified by Lee (1966), include poverty, unemployment, and political instability, which compel individuals to leave their home countries Conversely, pull factors attract migrants to new locations, such as job opportunities, higher wages, and improved living conditions.
Numerous studies have established connections between migration and economic development, highlighting the impacts on both the origin and destination regions (Borjas, 1989; LaLonde & Topel, 1997; Massey, 1989) Various mechanisms facilitate this interaction, notably through remittance flows, which play a significant role in economic growth (De Haas, 2010).
Remittances, which are cash or goods sent home by migrants to support their families, play a crucial role in migration, as highlighted by Taylor (1999) These funds serve as an investment in the family’s community, significantly enhancing household income (De Haas, 2010; Stark & Bloom, 1985; Taylor, 1999) This paper aims to clarify the impact of remittances on both agricultural and non-agricultural production within rural households in Vietnam.
Numerous studies have established a connection between household remittances and agricultural economics, indicating that migration can boost agricultural productivity by allowing remittances to be invested in essential farm inputs such as equipment and livestock (Li et al., 2013; Parida et al., 2015; Rozelle et al., 1999; Taylor & Lopez-Feldman, 2010) In Vietnam, rice agriculture is crucial, covering 7.2 million hectares (General Statistics Office of Vietnam, 2020) However, some research suggests that remittances may negatively impact agricultural labor productivity, leading to decreased production activities among households (Nguyen et al., 2019) Consequently, the relationship between remittances and rice agriculture in Vietnam remains ambiguous.
In addition to agriculture, rural households are increasingly exploring non-farm income sources, such as business ventures, services, and savings, which serve as alternative investment channels (Parida et al., 2015; Taylor, 1999; Taylor & Mora, 2006; Zhu, 2008) This paper investigates the relationship between remittances and these non-farm income sources, highlighting their significance in enhancing household financial stability.
Research indicates that remittances from migrants play a crucial role in enhancing household income This study focuses on evaluating how these remittances affect two key areas: rice income and non-farm income for households in rural Vietnam.
(Source: Processed by the author group)
Numerous datasets have been utilized to evaluate the effects of migration and remittances on agricultural productivity and household incomes Research on this topic in rural Vietnam typically emphasizes either household and individual levels or broader provincial and city levels Notably, studies such as those by Nguyen et al have contributed significantly to understanding these dynamics.
In 2019, data from the "Thailand - Vietnam Socioeconomic Panel" was utilized to analyze three rural provinces: Ha Tinh, Thua Thien Hue, and DakLak Most research, however, relies on household-level datasets such as the Vietnam Population Living Standards Survey (VHLSS) and the Vietnam Living Standards Survey (VLSS), as seen in studies by Cuong & Linh (2018), Cuong & Mont (2012), Phuong et al (2008), De Brauw (2010), and De Brauw & Harigaya (2007) Additionally, the Household Farmer Survey Dataset (VARHS) has been used in recent research (Narciso, 2020), with some studies combining both VHLSS and VLSS datasets (Nguyen et al., 2009; Nguyen et al., 2011).
Research on the relationship between migration, remittances, and agricultural income in rural areas has utilized various statistical models Studies in China have employed a three-stage smallest squared model using cross-sectional data (Rozelle et al., 1999; Taylor et al., 2003) In El Salvador, Damon (2010) applied a two-period least squared model to analyze the effects of migration and remittances on agricultural land use and wealth accumulation Similarly, in Vietnam, the two-stage smallest squared model with instrumental variables has been used to assess migration's impact on agricultural production (De Brauw, 2010; De Brauw & Harigaya, 2007) However, many studies focusing on the effects of migration and remittances on agricultural efficiency and income in rural Vietnam have predominantly utilized fixed impact models for table data (Cuong & Linh, 2018; Cuong & Mont, 2012; Narciso, 2020; Nguyen et al., 2009).
The impact of remittances from migrants on agricultural productivity and the income of rural households engaged in rice cultivation remains inconsistent Research indicates that in rural China, migration tends to reduce crop income (Rozelle et al., 1999; Taylor et al., 2003) However, in contrast, migration and remittances can enhance access to capital, resulting in improved farming income for families receiving migrants in Albania (McCarthy et al., 2009).
C ontributions of the R esearch
Research makes a unique contribution in three ways First, this study uses more up-to- date household survey data (Vietnam Access to Resources Household Survey 2014 and
This study, conducted in 2016, explores the evolving patterns and effects of migration and remittances in Vietnam, highlighting their dynamic nature over time Unlike previous research that typically focused on either migration or remittances, this analysis examines their combined impact on various household outcomes, including agricultural productivity, livelihoods, and income levels By investigating these factors, the study aims to offer a comprehensive understanding of how remittances from migrants influence agricultural efficiency and the financial well-being of households with migrant members.
S tructure of the R esearch
This research paper is structured to first explore the analytical framework connecting remittances to agricultural production efficiency and household income sources, highlighting gaps in previous studies It then outlines the empirical strategies and data description before presenting the results and findings Finally, the paper concludes with policy implications and remarks on the overall conclusions drawn from the research.
C oncepts & T heories
Migration refers to a permanent or semi-permanent change of residence, encompassing various distances and types It is a broad concept that includes both voluntary and involuntary movements, as well as international and internal migration.
Migration is influenced by specific rules and is driven by two main groups of factors: push factors and pull factors Push factors, as identified by Lee (1966), include poverty, unemployment, and political instability, which compel individuals to leave their home countries Conversely, pull factors attract migrants to new locations, offering job opportunities, higher wages, and improved living conditions.
Numerous studies have established connections between migration and economic development in both host and origin countries (Borjas, 1989; LaLonde & Topel, 1997; Massey, 1989) Various mechanisms facilitate this interaction, notably through remittance flows, which play a significant role in enhancing economic conditions (De Haas, 2010).
Remittances, which are cash or goods sent by migrants to support their families, play a crucial role in migration, serving as a vital investment in the community and significantly enhancing household income This paper aims to clarify the impact of remittances on both agricultural and non-agricultural production in rural households in Vietnam.
Numerous studies have established a connection between household remittances and agricultural economics, highlighting that migration can boost agricultural productivity by directing remittances towards investments in farm equipment and livestock (Li et al., 2013; Parida et al., 2015; Rozelle et al., 1999; Taylor & Lopez-Feldman, 2010) In Vietnam, rice agriculture is crucial, encompassing 7.2 million hectares (General Statistics Office of Vietnam, 2020) However, some research indicates that remittances may negatively impact agricultural labor productivity, leading to decreased production activities among households (Nguyen et al., 2019) Consequently, the relationship between remittances and rice agriculture in Vietnam remains ambiguous.
In addition to agriculture, rural households also explore non-farm income sources, including business ventures, services, and savings, which serve as complementary investment channels (Parida et al., 2015; Taylor, 1999; Taylor & Mora, 2006; Zhu, 2008) This paper investigates the relationship between remittances and these non-farm income sources.
Research indicates that migrant remittances play a crucial role in household income, particularly in rural Vietnam This study focuses on evaluating how these remittances influence two key areas: rice income and non-farm income for families in the region.
(Source: Processed by the author group)
M ethodology
Numerous datasets have been utilized to evaluate the effects of migration and remittances on agricultural productivity and household incomes, particularly in rural Vietnam Research often emphasizes the impact at both the household and individual levels, as well as at the provincial or city levels Notably, studies such as those by Nguyen et al contribute valuable insights into this area of research.
In 2019, research utilized data from the "Thailand - Vietnam Socioeconomic Panel" focusing on three rural provinces: Ha Tinh, Thua Thien Hue, and DakLak Most studies, however, rely on household-level datasets such as the Vietnam Population Living Standards Survey (VHLSS) and the Vietnam Living Standards Survey (VLSS), with notable contributions from Cuong & Linh (2018), Cuong & Mont (2012), and Phuong et al (2008) Other significant sources include the Household Farmer Survey Dataset (VARHS) as noted by Narciso (2020), and studies that combine both VHLSS and VLSS datasets, as seen in the works of Nguyen et al (2009) and Nguyen et al (2011).
Research has established a significant relationship between migration, remittances, and agricultural income in rural areas of various countries In China, studies utilizing a three-stage smallest squared model have explored these connections (Rozelle et al., 1999; Taylor et al., 2003) Similarly, Damon (2010) employed a two-period least squared model in El Salvador to analyze how migration and remittances influence agricultural land use and wealth accumulation In Vietnam, the two-stage smallest squared model has been applied to assess the effects of migration on agricultural production (De Brauw, 2010; De Brauw & Harigaya, 2007) However, many studies focusing on rural Vietnam have relied on fixed impact models using table data to evaluate the influence of migration and remittances on agricultural efficiency and income (Cuong & Linh, 2018; Cuong & Mont, 2012; Narciso, 2020; Nguyen et al., 2009).
F indings
The impact of remittances from migrants on agricultural productivity and income from rice cultivation in rural areas remains inconsistent Research indicates that in rural China, migration may reduce crop income, while in Albania, migration and remittances enhance access to capital, resulting in improved farming income for families receiving these funds.
Migrants' remittances play a crucial role in diversifying household income sources beyond traditional rice cultivation, enhancing agricultural productivity and enabling families to adopt varied livelihood strategies (Parida et al., 2015; Zhu, 2008) These funds allow households to invest in equipment and start small businesses, which accelerates local economic restructuring and creates non-farm employment opportunities (Démurger & Xu, 2011) Research indicates that even small-scale self-employment and informal business ventures can significantly boost non-farm income and stimulate economic growth in rural areas (Brunjes).
R esearch GAP
Many researchers investigating the effects of migration and remittances rely on surveys targeting heads of households or local migrants (King et al., 2006; Rindfuss et al., 2012; Rozelle et al., 1999; Sofranko & Idris, 1999) However, this method of primary data collection often falls short, as it may not accurately capture the issue at hand due to potential dishonesty or inaccurate responses from participants during interviews or surveys.
Previous studies have primarily focused on the impact of remittances on household income (Cuong & Mont, 2012; Nguyen et al., 2019; Rozelle et al., 1999) However, the funds sent back by migrants are not solely intended for enhancing the primary income; they are also utilized for covering essential expenses or invested in part-time jobs and alternative occupations outside the household's main source of income.
Our research addresses previous limitations by utilizing the VARHS secondary dataset to identify key variables, which serve as the primary data for our study We focus on a broad geographical area, encompassing various provinces and predominantly rural cities Additionally, we evaluate the influence of remittances on other income sources to ensure a comprehensive understanding of household inclusivity in financial management Through this methodology, we aim to analyze the impact of remittances on household development.
This section analyzes the effects of migration and remittances on various aspects, including the proportion of rice income derived from agricultural production and the overall income of rural households in Vietnam.
M easuring the share of rice income from agricultural production —8
Our research focuses on annual crop yield increases, building on previous studies that explored the effects of migration on agricultural investment and productivity, as well as livestock production (De Brauw, 2010; De Brauw & Harigaya, 2007; Do et al., 2019; Hohfeld & Waibel, 2013) We have comprehensive data on annual crop yields, allowing us to measure productivity growth in relation to land and labor (Nguyen et al., 2009) This process involves first assessing the efficiency of crop production and subsequently evaluating the growth in productivity.
The formula LBPit = (2) ư LBư represents the relationship between agricultural land productivity (LAP) and agricultural labor productivity (LBP), measured in VND per square meter per year and VND per working day per year, respectively Here, the annual income from farming is denoted as /1 (VND/year), while L indicates the area of land (in hectares) dedicated to annual crops, and LB refers to the number of man-days involved in annual crop production The variables i and t signify the specific household and year, respectively.
In Vietnam, rice is the most significant traditional crop, making the share of rice income in annual cultivation income a crucial indicator of crop output Rice cultivation demands considerable labor and capital, which means that migration influences rice production through both labor and capital channels The calculation of the share of rice income in annual cultivation income provides insights into the economic impact of rice farming in the region.
The RICE_SHAREit is calculated as RICE_SHARE multiplied by 100, where RICE_SHARE represents the ratio of annual rice income to total cultivation income This annual rice income includes both home consumption and sales, while the total crop income is considered in the denominator Consequently, LAP, LBP, and RICE_SHARE are interdependent variables that collectively represent annual crop production in our analysis.
Rural households can enhance their income by diversifying into non-agricultural activities, known as non-agricultural diversification This approach involves allocating household labor to various income-generating pursuits outside of farming, including self-employment and wage employment in non-farm sectors Understanding the influence of migration on these diversification strategies—both on-farm and non-farm—provides valuable insights into how farmers manage their land and labor resources To assess the extent of non-farm labor diversification, we followed the methodology outlined by Nguyen et al (2019).
The Simpson Diversification Index (SIDit) measures the diversification of non-agricultural labor among households in a given year, calculated using the formula SIDit = 1 - z*=1 p?tj Here, p represents the proportion of labor days allocated to a specific non-agricultural activity j relative to the total non-agricultural labor days of the household The index ranges from 0 to 1, indicating that if a household engages in only one non-farm job, its SIDit value is 0 As the household takes on more non-farm jobs, the ratio pitj decreases, leading SIDit to approach 1 A higher SIDit value signifies a more diverse non-farm labor portfolio for the household in that year.
E stimation strategy
Previous research by Adams Jr and Page (2005) and Adams Jr and Cuecuecha (2010) has examined the effects of migration and remittances on income In Vietnam, this relationship was further explored by Cuong and Linh (2018) and Nguyen et al (2019) This study utilizes the model proposed by Cuong and Linh (2018) to investigate how remittances from migrants influence agricultural productivity, specifically enhancing income from rice cultivation and providing additional livelihood strategies for rural households.
The equation ln(Yit) = /?0 + ^iGt + ^it^2 + p3remittancesit + uit + vit illustrates the relationship between household income from rice and other sources for household i in year t Here, ln(Yit) represents the logarithm of income, while Xjf denotes a vector of household characteristics The term remittances^ indicates whether household i had at least one migrant in year t Additionally, the variables Ui and vit account for time-invariant and time-unobservable factors, respectively.
Estimating the impact of migration and remittances poses challenges due to bias from omitted variables To address these deviations, instrumental variable regression is a commonly used econometric method However, identifying a suitable instrument that is strongly correlated with migration or remittances, while not directly influencing the outcomes, remains a difficult task.
In this study, we utilized the tabular nature of the data to mitigate endogenous bias by employing the household fixed-effect regression method This approach is grounded in the assumption that unobserved variables in the outcome equation are correlated with both migration and remittances, which remained unchanged between 2014 and 2016 The fixed-effect regression effectively eliminates unobservable time-constant variables in the dataset However, it may still be skewed if unobserved variables that fluctuate over time are related to migration and remittances We anticipate that the impact of time-varying variables, which we do not control for, will be minimal when we account for the observed variables that remain constant over time.
The Vietnam Access to Resources Household Survey (VARHS) is a collaborative effort involving the Central Institute for Economic Management (CIEM) and the Institute of Labor and Social Sciences (ILSSA), both under the Vietnamese government Conducted biennially, the survey encompasses approximately 2,600 households across 12 provinces in Vietnam A key feature of VARHS is its repeatable sampling method, which enhances the analysis of data relationships, making it a valuable resource for economic and social research.
The primary goal of VARHS is to investigate the behaviors, opportunities, and challenges faced by Vietnamese farmers, focusing on their economic conditions and access to productive resources, including physical, financial, human, and social capital The VARHS dataset is widely utilized in research on inequality, poverty, and the expenditure patterns of farming households, encompassing areas such as education, health, and livelihoods Additionally, it examines factors influencing income and savings, such as remittances and migration, offering valuable insights into how Vietnamese farmers manage agricultural risks.
Utilizing data from the VARHS Dataset, we identified the essential variables for our analysis, while also incorporating calculated variables to better assess the influence of incoming remittances on household income For clarity, we present the selected variables in Table 1 below.
Labor productivity (VND/working day) LBP
RICE SHARE The share of rice income in annual crop income
SID The Simpson Diversification Index
Rice income Household's income from rice cultivation
Other income / non-agricultural income of all members (VND)
Household in the urban or rural (0=Urban, l=Rural)
Numbers of members in a household (number) Household head's age (years)
Household head's gender (Male = 0; Female = 1)Completed years of schooling (year)
The amount of irrigation water you have access to (1 = always too small, 2 = sometimes too small, 3 = never too small)
Number of social groups that household is member of in village (number)
Total assets of the household (VND)
Amount of food household spending during the year (VND)
Amount of remittances household received during the year (VND)
Number of agricultural labor of households (number)
(Source: Author synthesized and calculated from VARHS 20Ì4 - 2016)