A study on the factors affecting the wealth gap in vietnam

+ Calculate the coefficient, the criteria for assessing the situation of wealth gap and factors affecting wealth gap in Vietnam.. The cross data regression models to the wealth gap Stud

INTRODUCTION

1 The rationale

Wealth gap is one of the problems attracting the attention of

countries worldwide and set for the top position It is the fact that big

gap in wealth will be detrimental to the growth, economic

development, social cohesion, threaten political stability, social

security of a nation International experience indicates that the rise in

wealth gap and income inequality adversely affect the quality of life

of people, increase poverty rates, hinder health and education

development in general and contribute to the increase in crime for

the poor in particular

In recent years, Vietnam has achieved high GDP growth

rate, but its performance impact on the poor decreased considerably

Although population groups’ income are increased and the life of all

strata of the population has been improved, income growth rate of

the poor is always lower than that of the rich, as a result, the gap

between the rich and the poor is widen out

The increase in wealth gap is a major challenge for

sustainable development and humane in our country It is necessary

to find the cause of rising wealth gap in our country Therefore, we

need to research and analyze the factors affecting wealth gap, which

is considered the basis to identify the right feasible solutions to limit

the increase in wealth gap

According to the above problems, the author has chosen the

theme: "The study of factors affecting the wealth gap in Vietnam" so

as to carry out her doctoral thesis This is a very meaningful issue in

terms of practicality; it is contemporarily significant in Vietnam’s

innovation and economic development

2 The aim

- Suggest system criteria and indicators to assess wealth gap and factors affecting wealth gap in Vietnam

- Review wealth gap in many different aspects

- Analyze the factors affecting wealth gap in Vietnam during the period 2002 - 2012 Consider whether factors belonging to the population characteristics and economic restructuring impact wealth gap or not?

3 The subject and scope 3.1 The subjects

- Study the indicator system to evaluate wealth, wealth gap and the factors affecting the wealth gap

- Study wealth gap and the factors affecting the wealth gap

in Vietnam

3.2 The scope

+ Content: Analyzed the current situation of wealth gap in Vietnam on different perspectives and factors affecting wealth gap in Vietnam

+ Space: thesis used estimation model to analyze the database of all the 63 provinces/cities in the country

+ Time: The thesis analyzed for the period 2002 -2012

4 Research questions

- What indicators are used to assess wealth, wealth gap and measure the effect of the factors on wealth gap in Vietnam?

- Why does wealth gap tend to increase? What is the cause?

- What are the decisive factors of wealth gap in Vietnam?

- Do the population characteristics and economic restructuring have an impact on wealth gap?

5 The method

- Literature review, information, synthesis, comparison

- Statistical Methods

- Quantitative analysis method: Using Stata

6 The contributions

+ Clarify incisively the rationale for wealth gap Overview

the theories and empirical researches on the impact of the factors

related to the problem of inequality in the country and in the world

Develop a theoretical framework used for analyzing the factors

affecting wealth gap in Vietnam

+ Suggest criteria and indicator system for assessing wealth,

wealth gap and factors affecting it

+ Calculate the coefficient, the criteria for assessing the

situation of wealth gap and factors affecting wealth gap in Vietnam

+ Analyze the impact of these factors on wealth gap

+ The results of the estimation models indicate that the

population characteristics and economic restructuring have an impact

on the increase of wealth gap

+ Suggest some solutions to limit wealth gap in Vietnam and

a number of recommendations on statistical methods for wealth gap

in Vietnam

7 The structure

Besides the introduction and conclusion, the thesis consists

of 4 chapters:

- Chapter 1: Overview of wealth gap and the factors

affecting the wealth gap

- Chapter 2: The indicator system and methods for analyzing

factors affecting the wealth gap

- Chapter 3: Analyze the situation of wealth gap in Vietnam during the period 2002-2012

- Chapter 4: Analyze the factors affecting wealth gap in Vietnam during the period 2002-2012

CHAPTER 1

AN OVERVIEW ON WEALTH GAP AND FACTORS

AFFECTING WEALTH GAP 1.1 A review of researches on wealth gap and the effect of factors on wealth gap

1.1.1 The studies describes the wealth gap

- The studies of wealth and social stratification in range of each region or area were only separate arrays describing the gap between the rich and the poor in each region or each area They didn’t show an organic relationship between the regions and areas to

be able to generalize the wealth gap in the country

- The studies of wealth and social stratification in the country drew an overall picture of wealth gap and income inequality in the country Studies have confirmed inequality in Vietnam tends to increase due to the difference in space, but they did not quantify and point out specific factors affecting the increase there

1.1.2 The studies used the analysis model of the effect of factors to the wealth gap

1.1.2.1 The cross data regression models to the wealth gap

Studies on wealth gap analyzed by using cross data regression models quantified the effect of factors to the problem of poverty or wealth and inequality in income These studies have only quantified the impact of factors on the household’s characteristics belonging to the income of a poor or rich group in a given year

1.1.2.2 The regression model of wealth gap using the panel data

The studies using the panel data model related to wealth gap

by domestic and foreign scholars almost exclusively analyze the

effects in a certain aspect on wealth gap or income inequality which

focuses mainly on: international integration, growth and economic

development, population aging, the financial system

In Vietnam, quantitative studies use panel data to analyze

income inequality limitedly Besides mainly description, some

studies on income inequality focused on issues of international

integration and economic growth

With the desire to find out the factors really impacting

wealth gap, the thesis using panel data analysis methods to

investigate factors influencing wealth gap

1.2 An overview theory on wealth gap

1.2.1 The theoretical basis of wealth gap

- Karl Marx’s theory: Marx studied social stratification and

wealth gap based on class polarization He said that division of

classes and social classes are derived from the difference in property

ownership

- Max Weber’s theory: Weber's theory says that the cause of

inequality is due to the economic political power and social prestige

- Modern theory: Study social inequality based on many new

and different aspects, which are not influence independently, but

always relate reciprocally

1.2.2 The concept of wealth, poverty and wealth gap

1.2.2.1 Concept of wealth

There are many different concepts of wealth; each concept

evaluates a rich household in different aspects As a whole, these

concepts are based on a certain number of criteria to consider like property, houses, land, serving utensils for living, income or expenditure

2.2.2 The concept of poverty

There are many concepts of poverty Single - way viewpoint considers poverty just as lack of food to eat and what to wear whereas the multi - dimensional perspective considers poverty in many different aspects: In addition, the demand for essential products and the living conditions are not satisfied, poverty is also considered to be the issues of education, health care, vulnerable, voiceless in society

1.2.2.3.The concept of wealth gap

In general, the concepts say wealth gap is evaluated primarily basing on income or expenditure The thesis notion of wealth gap expresses differences in property, income, expenditure, level of education, medical, health care, housing conditions and access to social services between rich population and poor population, between urban and rural areas, between regions and localities

1.2.3 The approach measuring wealth gap

1.2.3.1 The approach basing on the income gap between the richest and poorest

This approach is determined by comparing incomes between the rich and the poor It is easy to calculate and understand and it’s convenient to compare over time, between the local, the national, but

it does not indicate the income distribution in the medium group

1.2.3.2 The approach basing on the standard "40"

Recommended by the World Bank in 2002, this approach

determines the rate of income of 40% of the population with the

lowest income in total income of all the population

The restrict of this approach is to only reflect the income

distribution of two groups of lowest income It does not reflect the

income distribution of the income groups and above average

1.2.3.3 The approach basing on the Lorenz curve

Lorenz curve describes the percentage of income received in

total corresponding to the percentage of people who receive such

income starting from the poorest households

Lorenz curve reflects the distribution of income of all

groups However, Lorenz curve does not quantify income inequality,

in case of 2 Lorenz intersect, inequality can not be ranked

1.2.3.4 The approach basing on the Gini coefficient

The Gini coefficient is defined as the ratio of the area

between the Lorenz curve and the diagonal 450 compared to the area

of triangles beneath the diagonal 450

The limitation of the Gini coefficient is that it can not be

separated into groups to reflect inequalities between groups and

within each group

1.2.3.5 The approach basing on Entropy aggregate measures

Entropy aggregate measures are used to overcome the

limitations of Gini coefficient, allowing us to assess the level of

national inequality by investigating how much impact of inequality

within each subgroup or between groups

CHAPTER 2 INDICATOR SYSTEM AND METHODS ANALYZING FACTORS AFFECTING WEALTH GAP

2.1 The necessity and the requirements of building a system of statistical indicators to assess wealth, wealth gap and the factors affecting wealth gap

2.1.1 The necessity of building a system of statistical indicators to assess wealth, wealth gap and the factors affecting wealth gap

Wealth gap is assessed more deeply & comprehensively relying on not only income but also many different aspects Each aspect is a criterion to distinguish wealth These criteria must be concretized into the criteria for assessment

Currently GSO has given no public announcement of the criteria for assessing wealth and indicator system to measure wealth, wealth gap and factors affecting wealth gap Therefore, it is necessary to propose criteria and indicator system

2.1.2 Requirements of the indicator system

Statistical Indicator System must be effective, comparative, integrative and feasible

2.2 Recommend Statistical Indicator System for assessing wealth, wealth gap and the factors affecting wealth gap

2.2.1 Oriented proposals

According to the theoretical basis and the studies, the thesis suggests five criteria for evaluating wealth: (i) income, (ii) expenditure, (iii) assets, (iv) education and (v) medical and health care Based on these criteria, the thesis proposes the most appropriate indicators to measure wealth, wealth gap and factors affecting wealth gap Three indicators in Indicator Systems are presented: the

concept, the methods, and its meaning used in the analysis of each

indicator system and information source These indicator systems

will include:

- The indicators have been mentioned in a publication or in

an indicator system: These indicators may be remained or completed

- The new indicators: the thesis will build them

2.2.2 Recommend statistical indicator system for wealth

2.2.2.1 Indicators reflecting income

- Per capita income

- Income Structure

2.2.2.2 Indicators reflecting expenditure

- Expenditures per capita consumption

- The structure of consumer spending

2.2.2.3 Indicators reflecting Property

- The value of durable goods per household

- The percentage of households of each housing type

2.2.2.4 Indicators reflecting education

- Proportion of the population aged and over 15 achieve the

highest degree

- The spending structure in education

2.2.2.5 Indicators reflecting the situation of health and health care

- Proportion of population with medical care

- The proportion of treatment in/ out of residence

- Spending for per person on medical care

- Proportion of population with access to clean water

- The percentage of households using sanitary latrines

2.2.3 Recommend statistical indicator system assessing wealth gap

- Coefficient between the rich and the poor

- Coefficient spacing income / expenditure

- Coefficient of rural urban division

- Gini coefficient

- Entropy synthetic index

2.2.4 Propose statistical indicators system of factors affecting wealth gap

2.2.4.1 Indicators reflecting population characteristics

- Proportion of the population aged and over 15 is ethnic minorities

- The population structure in working age

- Proportion of the population depends

- The proportion of urban population

- Proportion of population aged and over 15 is literacy

- Net migration rate

2.2.4.2 Indicators reflecting economic restructuring

- The labor structure divided by sector

- GDP Structure divided by sector

2.2.4.3 Indicators reflecting the trend of international integration

- The rate of export (or import) to GDP

- The proportion of capital foreign direct investment to GDP

2.2.4.4 Indicators reflecting other socio - economic characteristics

- GDP per capita

- The ratio of financial encouragement in GDP

- Labor productivity by region economy

2.3 Methods analyzing factors affecting wealth gap

2.3.1 Methods for analyzing panel data model

2.3.1.1 General introduction of panel data model

Panel data is combined data, combining data by time series

and cross data by space

2.3.1.2 Advantages of panel data

Panel data increases the sample size, handles heterogeneity

issues, and provides more information, less multicollinearity and

more effectiveness It studies the changing dynamics of cross - time

units and controls variables unobserved but change over time and it

studies more complex models

2.3.2 Types of panel data

General model:

i: Cities or provinces

2.3.2.1 Unchanged coefficient model (POLS)

In gross squared model (POLS), all the coefficients block

and regression coefficient constant over time and across space

2.3.2.2 Random effects model (REM)

REM model is used in the case of heterogeneous elements

among provinces/ cities unobserved and having no correlation

relationship with the independent variables of the model The model

form:

(**)

2.3.2.3 Fixed effects model (FEM)

FEM model is used in case of heterogeneous elements

correlated with the independent variables Xi The model form:

(***)

2.3.3 Construct research theoretical framework

Research framework is used to analyze the factors affecting wealth gap

CHAPTER 3 ANALYSIS OF WEALTH GAP IN VIETNAM DURING

PERIOD 2002 - 2012 3.1 Analysis of wealth gap in Vietnam basing on income

3.1.1.The general situation of wealth gap

In terms of Gini coefficient, in 10 years (2002 - 2012) income inequality in Vietnam tends to rise, but only modestly increases

As for Lorenz curve, inequality increases only in the low -

income group

Income spacing and wealth gap ratio says that income inequality in Vietnam increases rapidly and grows; these coefficients are gradually reaching higher levels of inequality

Compared to the pretty rich groups, the less income ratio the poor group received, the poorer they become, which causes a bigger gap in wealth

Factors of institution and policy

Factors reflecting population characteristics

Wealth gap (Dependent variables)

Factors reflecting economic restructuring

Factors reflecting international integration

Factors reflecting other socio

- economic characteristics

Factors of geography

Rich groups

pretty group

Everage group

Poor group

Close poor group

Years

Chart 3.3: Income proportion of 5 poor - rich groups during the

period 2002 - 2012

3.1.2 Wealth gap between urban - rural areas and in each area

Gap ratio between urban and rural areas is being shortened,

but the absolute gap increased

Table 3.3: Income per capita a month

by urban - rural areas in Vietnam in the period 2002 - 2012

Year

Sectors

Income per capita a month (Thousand Dong)

2002 2004 2006 2008 2010 2012

Urban 622,1 815,4 1058,4 1605,2 2129,5 2989,1

Rural 275,1 378,1 505,7 762,2 1070,4 1579,4

Urban - rural

absolute gap 374,0 437,3 552,7 843,0 1059,1 1409,7

Urban - rural

ratio gap (time) 2,3 2,2 2,1 2,1 2,0 1,9

Source: Survey Results about households’ Living Standards by

General Department of Statistics

Income gap between urban and rural areas is narrowing because income structure of rural areas is being changed in the direction of progress making the income in this area increase

- While the wealth gap within the urban area tends to decrease, in rural areas it tends to increase, which make wealth gap

in the country increase too

3.1.3 Wealth gap in each territory and province/city

In the early years of the period 2002 - 2012, wealth gap of the regions with higher incomes and living standard such as the South East and the Red River Delta took place more deeply than that

of the low - income regions, but the last stage is the opposite

Except for the Southeast region, wealth gap and income inequality tends to decrease; the remaining seven are on an upward trend, especially the most strongly increase in poor areas such as Highland, Northwest and Northeast

3.2 Wealth gap in other aspects

3.2.1 Property gap

First, convenience and consumer durables: Poor households have little comfort in family; worthy consumer durables of the households in this group only account for 1/10 of the rich group The utensils they are using mostly all kinds of cheap and outdated furniture In contrast, wealthier households mainly use facilities and luxury items with great value

Second, housing gap between the two groups is gradually changing in a positive direction The vast majority of wealthy households live in permanent homes whereas poor households

mainly live in semi - permanent or temporary houses

3.2.2 Expenditure gap

The gap in living standards of the households in the two

groups is still quite high and tends to widen:

There is a gradual change in the structure of life expenditure

of the two groups in terms of food expenses in the direction of

reducing spending on food, drink and increase non - food expenses

In fact, 70% of poor households spend on food whereas 50% of rich

households spend on their cultural life, spirit, education and best

health care

3.2.3.Education gap

Educational attainment between the rich and the poor is

increasingly isolated 90% of the population aged and over 15 in

poor groups get mainly low levels of education without highest

degree due to: never been to school, no degree, elementary or junior

high school graduation On the contrary, the majority of the

population in rich groups at this age range achieves the highest level

of over high school graduation

While rich groups increase the proportion of high levels of

education, poor groups remain unchanged The difference in

educational level between the rich and the poor groups sharply

increase in this period accounting from 3.5 times (2002) to 73 to

106.5 times to 101.5 times (2012)

There is a big gap in expenditure on education in general and

each expenditure in particular between the two groups Poor people

also have to pay money for such expenses as school building, class,

school uniforms, school supplies… occupying 4/5 of their total

educational spending

3.2.4 Gap in health and health care

Because only the poor with severe diseases go to see the doctor, the proportion of people admitted to hospital for inpatient treatment is greater than that of the rich

Inequalities in the health sector is also reflected a fairly obvious way by the gap in health spending per person on health care and access to health services

The vast majority of the rich population use clean water treated by the plant supplier or from wells, whereas about 70 - 85%

of the poor population use self - sufficient, unhygienic water resource It is obvious that inequality of opportunity to use clean water between two groups fell quite clearly in the period 2002 -

2012 More particular, the difference in the proportion of population between the two groups with access to clean water decreased: from 12.6 times (2002) to 5.9 times (2012)

Living environment gap between the rich and the poor has been shortened In 2002, regarding using sanitary latrines, the proportion of rich households is 20 times higher than that of poorer households and by 2012 this proportion accounts for only 3.79 times

3.3 Synthesize multidimensional wealth gap during the period

2002 - 2012

The thesis synthesizes wealth gap in multiple dimensions In every dimension, the thesis chooses some representative indicators for evaluation and comparison

General wealth gap

Urban wealth gap

Rural weal gap

Wealth gap in Durable items

Wealth gap in closed &

semi-closed housing

Wealth gap in non-food Wealth gap in food

Wealth gap in average expenditure

per person

Wealth gap in education of

population over 15 years

old

Wealth gap in average

medical costs per

person

Wealth gap in using septic

and semi-septic toilet

Wealth gap in using

clean water

Year

Year

Year

Figure 3.7: multidimensional inequality during the period

2002 - 2012

- Wealth gap in the whole country in general and in each

region in particular grows particularly strongly in rural areas

- Differences in income, education levels between the rich

and poor groups are widening

- Gap in living standards, consumer spending, housing and

means of living between the rich and poor has improved, but is still

quite high

- Inequalities in health has not been improved much, the

poor have little chance of medical care in the highly - qualified

health services

- Poor people are also actively interested in health care;

living environment contributing to sharply reduce wealth gap

CHAPTER 4 ANALYSIS OF FACTORS AFFECTING WEALTH GAP

IN VIETNAM DURING THE PERIOD 2002 - 2012 4.1 Factors affecting wealth gap in Vietnam today

4.1.1 Factors reflecting the development of the market economy institutions

The failure of the market economy institutions will cause income inequality and increase the big gap between the rich and the poor For instance, the underdevelopment of capital markets causes small businesses and the poor not to have access to formal sources or active deformation of the real estate market and stock market makes

a group of people rich quickly The richness thanks to land speculation or stock does not supply any work for the society and does not contribute to the poverty alleviation but makes an increasingly wider gap between the rich and the poor

4.1.2 Factors reflecting the state’s policy

The weakness of the state policy still exists, causing the barrier to the economic and social development and making a bigger wealth gap More specific:

Public expenditure policy: in favor of services for more rich

consumers causing the fact that the rich benefits more than the poor

In other words, the management of public spending is inadequate and creates opportunities for loss and state budget waste

In general, investment policies and public investments in particular are not reasonable and effective In Poor areas, rural areas

and mountainous areas, the rate of investment is too low These regions are more isolated compared to other regions causing an increasing gap between the rich and the poor Public investment

policy is mainly applied for state enterprises but creates very few

jobs with low efficiency

Management policy of the state: shortcoming and not close;

for example, there appear some new - rich people with unclear

income

Policy supporting for the poor is not highly effective

because as reflected many poor people become poor due to lack of

capital, lack of jobs, lack of experience and level of knowledge

Policies and projects can not be overall coherent in poverty

reduction; lack of communication, coordination and overlap

Health and health care policy remains shortcomings;

medical network is distributed irrationally & inconveniently for

people living in mountainous areas and remote areas Mechanisms

and policies for free health insurance for the poor and ethnic

minorities are still loose and incomprehensive

4.1.3 Factors reflecting geographical aspects

4.1.3.1 Uneven development between urban and rural areas, within

each region

During the period 2002 - 2012, the increase in wealth gap in

Vietnam was mainly due to the uneven development within rural

areas, but the gap between urban and rural areas contributed only a

small part

Uneven speed of development among rural areas in the

country is also a cause

4.1.3.2 Gap between regions and within each region

The uneven speed of development between regions causes

regional gap to grow The effect of wealth gap between regions on

the whole country gets smaller Wealth gap contributions of eight

regions to the whole country’s inequality are growing conversely

Approximately 5/6 of inequality of the country is due to the uneven distribution of income within the region, the remaining 1/6 is due to uneven development between regions

4.1.4 Factors reflecting population characteristics

Gap in ethnicity, age, education level, and living area affects the gap between the rich and the poor

4.1.5 Factors reflecting economic restructuring

Lewis's theory says that the shift from agriculture to industry contributes to increase inequalities in the early stages and reduce at the later stage

4.1.6 Factors reflecting international integration trend

The process of opening and integration into the world economy brings about the gap in income and living standard between population groups, between urban and rural areas, which is also a common event in the agricultural country as Vietnam

4.1.7 Factors reflecting other socio - economic characteristics

Factors belong to other socio - economic characteristics affecting wealth gap such as economic growth, labor productivity, and tax rate in the contribution to GDP

4.2 Estimate and analyze regression model of factors affecting wealth gap

4.2.1 Develop regression model

4.2.2 Estimate and select the appropriate regression model

* The estimation of the regression model with the dependent variables is Gini coefficient: estimation results indicate that REM -

Robust model is the most appropriate

* The estimation of the regression model with dependent variables is wealth gap coefficient: estimation results indicate that

FEM - Robust model is the most appropriate