constraints to market participation in agriculture in vietnam

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Constraints to market participation in agriculture in Vietnam

Development Economics Research Group (DERG)

University of Copenhagen (UoC)

Central Institute for Economic Management (CIEM)

Ministry of Planning and Investment (MPI) of Vietnam

Centre for Agricultural Policy (CAP)

Institute of Policy and Strategy for Agriculture and Rural Development (IPSARD)

Ministry of Agriculture and Rural Development (MARD) of Vietnam

Prepared under the Agriculture and Rural Development (ARD) Programme

Royal Embassy of Denmark of Vietnam

Specific Authors:

Chiara Cazzuffi*, Andy McKay*, Luu Duc Khai**, Nguyen The Long*** and Thuy Do Minh***

* University of Sussex, Brighton, UK; ** CIEM, Hanoi, Vietnam; *** CAP, Hanoi, Vietnam

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Abstract: It is well known that Vietnam has achieved impressive success in agricultural commercialisation, in particular in relation to rice and also cash crops. This paper draws on evidence from the Vietnam Access to Resources Household Surveys in 12 provinces in 2006, 2008 and 2010, and looks at the extent to which households are engaged in selling in agriculture, looking separately at rice and cash crops. Significant numbers of households still do not sell, or only occasionally sell rice, but this varies significantly by province; in addition poorer households are also those that sell less. Small land size is an important factor, but other factors are also important including land restrictions (which encourage cash cropping), extension, presence of local market facilities, and membership of farmers or women's groups. Keywords: Agriculture; Market participation; Transactions costs; Vietnam. JEL: O13, Q12, Q13 Acknowledgements: We are grateful for extensive support and comments from participants in a seminar at CIEM in July 2010 when an earlier draft of this paper was presented. We are grateful too for extensive comments and advice from several colleagues in CAP; and to Simon McCoy and Finn Tarp for comments and advice throughout.

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1. Introduction

Agricultural commercialization is an indispensable pathway towards economic growth and development for most developing countries relying on the agricultural sector (Pingali and Rosegrant 1995; von Braun 1995; Timmer 1997). For almost all countries which have achieved successful agricultural development, commercialization has played a key role in this. Since the introduction of Doi Moi reforms in the late 1980s, Vietnam has experienced remarkable economic growth and an impressive reduction in poverty. In the agricultural sector, Doi Moi reforms included

de-collectivization of land and improvements in land titling,

removal of price controls on many goods (including rice and fertilizers),

provision of greater autonomy to the private sector, and

liberalization of agricultural markets, including removal or reduction of restrictions to exports and to internal trade.

As a result of these reforms, agricultural commercialization achieved remarkable advances which led to substantial improvement of farmers’ income. Rice production increased dramatically and transformed Vietnam from being a net rice importer to being one of the world’s largest rice exporters. Agricultural production at national level also became more diversified - a very typical result of the commercialization process in agriculture - with increased production of cash and industrial crops (especially coffee) and aquaculture. Vietnam now lies in top exporters of many agricultural commodities in the world such as coffee, cashew, rubber, tea, aquaculture etc. This is an amazing achievement for a country that used to be even unable to produce adequate food for national food security. In addition, two thirds of farmers previously primarily engaged in subsistence farming are estimated to have entered the market following the process of liberalization (World Bank 2008). Between 1993 and 1998, real incomes of rural households increased by almost 60 percent, an unusually rapid growth for rural communities (Aksoy and Isik-Dikmelik 2007). Moreover, more than half of this growth in rural areas was caused by the growth in agricultural incomes (Isik-Dikmelik 2006). Despite this impressive progress, agricultural commercialization in Vietnam remains far from being fully achieved. The degree of agricultural commercialization at the household level varies greatly by region and crop. Many may not have realized the benefits that commercialization can bring; others might be experiencing difficulties in accessing markets for sale. Therefore, in order to facilitate the smooth process of transforming agriculture from subsistence to fully commercialized farming system with the aim of bringing benefits to the majority of rural households and further help accelerate poverty reduction in Vietnam, it is essential to answer several important questions such as the following:

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1. What are the trends in agricultural commercialization at the household level

recently? 2. What are impacts of agricultural commercialization for welfare dynamics of

agricultural households? 3. What are the characteristics that influence agricultural commercialization and

what are the constraints to extending this further? 4. Which areas of investment should policy makers prioritize in order to support

agricultural commercialization in Vietnam, especially taking into account socio-economic differences between regions and groups?

While we begin by discussing commercialisation in general terms, in this analysis we will focus particularly on two key areas of commercialisation: rice, the major food crop, and cash crops, which are of course produced specifically for the purpose of sale. Our analysis indicates that under the period under study, 2006 to 2010, the proportion of households engaged in agricultural commercialisation has declined slightly, but the extent of participation, for those who do engage in commercialisation, has increased. Household welfare shows a positive correlation with agricultural commercialisation, even though we cannot, at this stage, establish the direction of causality. We have identified several factors that constraint market participation of Vietnamese agricultural households, or more confidently Central Highland, North East and North West agricultural households, which can broadly be categorized into the following three groups:

Household assets, in particular land

Access to extension and membership of unions

Transaction costs, notably the existence of market facilities and the availability and access to channels of sale, including traders.

The relative importance of each factor for the ability of households to participate in agricultural markets varies between provinces, and the analysis also needs to take into account the specific characteristics of each province. The paper is organized as follows. The following section provides a brief summary of existing literature on the question of commercialisation, both international and specifically related to Vietnam. The data and methodology is discussed in section 3, while section 4 discusses patterns and trends in commercialisation over the survey period. A descriptive analysis of the characteristics of households engaged in commercialisation is presented in section 5, followed by a multivariate econometric analysis in section 6. The channels of sales used by commercialising households are discussed in section 7, while section 8 concludes.

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2. Literature review

The starting point of most theoretical and empirical work on market participation is that differences in transaction costs, as well as differential access to assets and services to enable engagement in the market are important factors underlying heterogeneous market participation among smallholders (Key, Sadoulet et al. 2000; Barrett 2008). Transaction costs are the observable and unobservable costs associated with arranging and carrying out a transaction, and they represent barriers to market participation. They include the time and monetary costs of obtaining information, of searching for a trading partner and bargaining over the terms of the exchange, and the costs of contract enforcement, as well as the costs associated with distance to formal markets due to poor quality infrastructure which may be a cause of high transport costs. Transaction costs rationally induce some households to self-select out of markets and may reduce household responsiveness to price shocks. Measuring transaction costs is not straightforward: they cannot be observed if they are high enough to deter participation, and are usually only partly observable even when transactions occur. Thus, the literature tends to rely on proxies, observable exogenous variables that are expected to influence the size of transaction costs, such as measures of distance to markets, availability of transport and access to information. A second important factor is risk and attitudes towards risk; households concerned about their own food security and facing high degree of risk may choose not to sell in order to be sure of meeting their own consumption requirements. The determinants of smallholder participation in agricultural markets have been explored especially in the African context. Overall, a small proportion, often less than one-quarter, of Sub-Saharan African farmers or of rural households (depending on the definition of the sample) participate in the staple food-grain market. Net food sellers are even fewer, but autarky is not the prevailing pattern: most rural households are actually net buyers of the food crops they produce, relying on proceeds from cash crop sales or off-farm employment. The literature identifies strong positive associations between market participation and (a) household assets (especially land, but also livestock, labour and equipment) and income (Nyoro, Kiiru et al. 1999; Cadot, Dutoit et al. 2006; Stephens and Barrett 2006; Boughton, Mather et al. 2007; Levinsohn and McMillan 2007); (b) access to credit and insurance (Cadot, Dutoit et al. 2006; Stephens and Barrett 2006); (c) input use and access to extension services (Alene, Manyong et al. 2008); (d) low levels of transactions costs, including transport costs and information costs(Heltberg and Tarp 2002; Alene, Manyong et al. 2008; Ouma, Jagwe et al. 2010). Overall, wealthier and more favourably located households appear much more likely to sell to markets. However, Stephens and Barrett (2006) find that a certain amount of gross sales by poorer households simply reflect credit market imperfections, as households without access to the lending market use the commodity market as a form of de-facto seasonal credit, to then buy the same commodity back later. A similar argument can also apply in relation to access to storage.

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With respect to market participation in Vietnam, Rios et al (2008) find that households with higher productivity tend to participate in agricultural markets regardless of market access factors, suggesting that programs targeted at enhancements in farm structure and capital have the potential to increase both productivity and market participation, while investments in market access infrastructure seem to be relatively less important (Rios, Masters et al. 2009). This might reflect the fact that already in the early 1990s Vietnam had a much better coverage of basic rural infrastructure in most regions compared to countries with similar levels of income (Aksoy and Isik-Dikmelik 2007).

3. Data and Methodology

Commercialization can be conceived of and measured in a number of ways, and many different concepts have been used in the literature. It is often understood in terms of market participation; in turn this can be participation in markets for sales of output or for purchased inputs. The focus in this paper is on sales of output, specifically of crops. We present and analyse here three measures of commercialization: the proportion of overall output sold, the proportion of rice (the dominant food crop) sold, and whether or not the household grows any cash crops, measures which are discussed in more detail below. A straightforward measure of agricultural commercialization is the proportion of agricultural production which is sold, and this we use as a first measure of commercialization. But commercialization can take more specific forms. One is the decision by a household to grow a cash crop; almost by definition these will tend to be sold. A second concept of commercialization is the decision by a household to sell some of its food crop production, rather than retaining it all for its own consumption. In the latter case we examine this question for the case of rice, the dominant food crop in Vietnam. Thus the main definitions of commercialisation we focus on in this paper are the decision by a household to grow cash crop and the decision by a rice farming household to sell some of its output. The data this paper is based on was collected by the Vietnam Access to Resources Household Survey (VARHS) in 12 provinces between July and September 2006, July and September 2008 and July and August 2010.1 The VARHS is a multi-purpose survey collecting a wealth of information at the household level, including demographics, land use and property rights, household assets, time use and sources of income, access to credit and insurance, social capital, as well as household access to input and output markets. The survey also includes a commune-level questionnaire, collecting summary information on the commune with respect to agriculture, employment, infrastructure, irrigation management, credit availability and shocks. The key sampling strategy of the VARHS is to re-interview rural households sampled for the income and expenditure modules of the 2002 and 2004

1 The sampled provinces are, by region: Red River Delta: Ha Tay. North East: Lao Cai, Phu Tho.

North West: Lai Chau, Dien Bien. North Central Coast: Nghe Anh. South Central Coast: Quang

Nam, Khanh Hoa. Central Highlands: Dak Lak, Dak Nong, Lam Dong. Mekong River Delta: Long

An.

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Vietnam Household Living Standards Survey (VHLSS) in the 12 provinces.2 Provinces were selected in order to use the survey as an evaluation tool for Danida supported programs in Vietnam. Therefore, the sample is statistically representative at the provincial but not at the national level. It has important coverage in Northern and North-Western provinces and the Central Highlands, as well as in other provinces. One limitation of the VARHS compared to the VHLSS is the availability of less detailed data on consumption expenditures, and especially the lack of data on expenditure for rice purchases. This does not allow us to investigate whether market participants are net food buyers or net food sellers, thus excluding an important welfare dimension from our analysis of agricultural commercialization. On the other hand, the VHLSS data on crop production and market participation are much more limited than VARHS and would not allow us to carry out an analysis of the kind conducted here. The 2006 round of the VARHS survey covered 2324 households in 466 communes, the 2008 round interviewed 3269 households in 477 communes, while the 2010 round covered 3208 households in 467 communes. The cross-section samples we use in this paper only include households who are engaged in crop production, about 90% of all surveyed households in each year. We also use a panel of 1733 households engaged in crop production who were initially interviewed in 2006 and then identified and re-surveyed in both 2008 and 2010. In order to minimise problems caused by the differences in sampling between the 2006 wave and the other two, we carry out the descriptive analysis in this paper using the panel, while we use the cross-section samples for each year to conduct the econometric analysis of the proportion of agricultural output sold, the probability of selling rice and of the probability of producing cash crops. In our descriptive and econometric analysis of rice sales, we use a sample that only includes households growing rice, in order to reduce unobservable household-level heterogeneity that might be reflected in crop choices. Our definition of cash crops includes coffee, tea, cocoa, cashew nut, sugar cane, pepper and rubber. We begin by analyzing the situation in relation to commercialization in descriptive terms, looking at how rates of commercialization differ by region, type of household etc. and how these change over the three years covered by the survey. We contrast the characteristics of households engaged in commercialization with those that are not. In so doing we look at the association between commercialization and household wellbeing. We then conduct an econometric analysis of the factors affecting the decision to sell rice and the decision to grow a cash crop, where these factors are modelled as a function of the characteristics of the household, region etc. We will then consider what are the major constraints which prevent households from commercializing further.

2 See CIEM et al. 2009 for further details on the sampling strategy. CIEM, DOE, et al. (2009).

Vietnam Access to Resources Household Survey: Characteristics of the Vietnamese Rural

Economy (2008 Survey). Hanoi, Statistical Publishing House. CIEM et al. 2009 for further details

on the sampling strategy.

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4. Trends in the pattern of commercialization

4.1. Overall

Table 1 is based on a definition of overall commercialization, which is the total value of output sold divided by the value of total production, for all crop categories. This table is computed for all crop producing households in the panel over this period. Columns 2 and 3 report the proportion of households that grow crops over the total number of households in the sample. Overall, this remains stable between 2006 and 2010, with some variation by province (for instance, the share of households growing crops increases markedly in Khan Hoa and Dak Nong, while it declines in Ha Tay and Lai Chau). Columns 4 to 6 report the proportion of households selling some output, while columns 7 to 9 report the crop commercialisation index (value of total output produced divided by value of output sold) for all households engaged in agriculture. Focusing first on changes over time, across the 12 provinces between 2006 and 2010 the proportion of crop producing households who sell some of their output in fact declines, as does the overall proportion of output sold over total production. This is also the case in each of the five income quintile groups, and is also the case in many of the provinces; only in Quang Nam does the proportion of households who sell increase, and only in Quang Nam and Dak Nong does the value of output sold relative to the value of total production increase. This is generally a reflection of the increasing importance of non-agricultural livelihoods for many of these households over the period. Table 1: Trends in overall pattern of agricultural commercialization, 2006 to 2010

% of households

engaged in agriculture % of households that sell some

output Crop commercialisation index

2006 2010 2006 2008 2010 2006 2008 2010

Province

Ha Tay 88.33% 82.92% 68.3% 73.7% 61.2% 25.45% 32.95% 25.98%

Lao Cai 94.25% 98.85% 89.0% 79.3% 65.9% 44.05% 27.27% 23.99%

Phu Tho 87.21% 91.80% 78.3% 70.3% 54.2% 23.16% 25.10% 19.57%

Lai Chau 99.11% 89.29% 77.6% 48.0% 44.9% 23.59% 12.52% 15.12%

Dien Bien 97.14% 98.10% 98.0% 50.5% 58.4% 39.58% 19.63% 19.08%

Nghe An 83.85% 84.38% 81.9% 80.6% 53.5% 34.42% 30.93% 28.00%

Quang Nam 88.28% 86.55% 78.8% 87.5% 86.3% 37.91% 41.30% 49.83%

Khanh Hoa 55.26% 65.79% 81.0% 90.5% 61.9% 51.80% 59.09% 43.46%

Dak Lak 91.85% 91.11% 94.0% 97.4% 93.2% 74.28% 79.47% 73.23%

Dak Nong 81.25% 90.63% 98.6% 98.6% 94.6% 83.31% 86.62% 91.50%

Lam Dong 92.54% 92.54% 98.3% 100.0% 82.8% 85.79% 95.83% 74.43%

Long An 73.08% 77.62% 89.4% 92.2% 81.7% 74.60% 74.53% 70.60%

Income quintiles

Lowest 97.87% 93.62% 80.1% 73.4% 68.2% 31.82% 33.97% 33.77%

2nd 93.50% 92.58% 85.1% 80.3% 68.6% 40.71% 37.36% 38.80%

3rd 92.43% 88.18% 83.7% 81.2% 69.9% 44.76% 44.94% 44.17%

4th 86.57% 84.41% 80.5% 82.6% 68.9% 46.88% 48.58% 39.96%

Highest 77.49% 74.17% 79.6% 76.6% 67.2% 51.22% 52.82% 44.42%

All 86.45% 86.59% 81.9% 78.8% 68.6% 42.40% 42.78% 39.88%

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But focusing just on households that sell, the proportion of the output they sell in fact increases over this period, as reported in Table 2. Overall the proportion sold increases from 52% in 2006 to 57% in 2010; these increases are observed in most quintile groups and most clearly among the lower quintiles. Increases in the proportion sold are observed particularly in the coastal provinces and some central highlands provinces, while in the north and north-west the proportion sold in fact falls or remains the same. Comparing across provinces, the rates of commercialization (i.e. the proportion of output sold, if selling) are highest in the Central Highland provinces and Long An. In the Central Highlands this largely reflects the importance of cash crops, especially coffee there, and households that produce coffee will almost always sell it. In Long An the practice of commercialization has been well developed for some time, and remained high throughout this period. The rate of commercialization is also higher among households that were in higher quintile groups in 2006 compared to those that were in lower quintile groups; richer households are able to sell a higher proportion of their output. Table 2: Trends in overall pattern of agricultural commercialization, 2006 to 2010 Proportion of output sold, if selling

2006 2008 2010 Province Ha Tay 37.3% 44.7% 41.6% Lao Cai 49.5% 34.4% 36.4% Phu Tho 29.6% 35.7% 35.3% Lai Chau 30.4% 26.1% 33.7% Dien Bien 40.4% 38.9% 32.7%

Nghe An 42.0% 38.4% 52.4% Quang Nam 48.1% 47.2% 57.8% Khanh Hoa 64.0% 65.3% 70.2% Dak Lak 79.0% 81.6% 78.6%

Dak Nong 84.5% 87.8% 88.6% Lam Dong 87.3% 95.8% 89.9% Long An 83.4% 80.8% 81.7% Income quintiles Lowest 41.0% 47.8% 47.9% 2nd 47.4% 45.5% 54.4% 3rd 52.8% 55.3% 60.0% 4th 58.0% 57.8% 58.5% Highest 64.2% 69.6% 66.4%

All 51.7% 54.3% 56.8%

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4.2. Commercialization of rice

The situation in relation to participation in the rice market is summarized in Table 3 at the sample as well as by province and socio-economic status, while Figure 1 provides a summary of the main messages visually. Over this period the proportion of households growing rice declines slightly, from 88 to 85 percent of all households engaged in crop production. But there is evidence of continued increase in commercialization. The proportion of households selling rice increases from 51 to 56% over the period. Further, the share of rice output sold (conditional on selling) increases slightly between 2006 and 2008, and more markedly between 2008 and 2010, with an overall increase from 46 to 54% of produced rice over the period 2006-2010. Figure 1 provides a visual summary for this.

With respect to geographical distribution, rice cultivation is dominant in all provinces except the three Central Highlands provinces, where most of cash cropping, and all of coffee cultivation, are concentrated. The proportion of households selling rice varies widely across provinces and tends to fluctuate substantially from one year to the next. Overall between 2006 and 2010, however, more people are selling rice in 2010 in all the provinces except in the two North Western provinces of Lai Chau and Dien Bien, in Nghe An and in Khanh Hoa.

The extent of rice commercialisation tends to be highest in the Central Highlands provinces and in Long An. Over the 2006-2010 period, it increases in all provinces, with the exception of a small decline in Lao Cai and Long An. Table 3: Share of households producing and selling rice by province and income quintiles, 2006-2010

Grow rice Sell rice Share of rice sold*

2006 2008 2010 2006 2008 2010 2006 2008 2010

Province

Ha Tay 0.97 0.98 0.96 0.44 0.52 0.57 0.35 0.41 0.46

Lao Cai 0.93 0.93 0.90 0.55 0.46 0.57 0.37 0.24 0.35

Phu Tho 0.96 0.92 0.88 0.21 0.39 0.35 0.21 0.25 0.36

Lai Chau 0.99 0.99 0.99 0.52 0.37 0.30 0.28 0.30 0.40

Dien Bien 1.00 1.00 0.98 0.88 0.40 0.51 0.40 0.43 0.41

Nghe An 0.92 0.90 0.89 0.53 0.46 0.35 0.35 0.38 0.52

QuangNam 0.93 0.94 0.91 0.48 0.64 0.80 0.46 0.43 0.58

Khanh Hoa 0.81 0.81 0.76 0.53 0.71 0.50 0.54 0.30 0.67

Dak Lak 0.59 0.54 0.60 0.45 0.62 0.47 0.58 0.63 0.78

Dak Nong 0.46 0.36 0.34 0.62 0.56 0.64 0.57 0.66 0.59

Lam Dong 0.28 0.31 0.31 0.25 0.61 0.56 0.34 0.81 0.71

Long An 0.93 0.87 0.84 0.86 0.92 0.89 0.83 0.83 0.79

Income quintiles**

Poorest 0.95 0.95 0.95 0.48 0.49 0.51 0.37 0.42 0.5

2nd poorest 0.93 0.92 0.9 0.53 0.54 0.57 0.43 0.43 0.54

Middle 0.89 0.88 0.85 0.52 0.6 0.59 0.49 0.48 0.57

2nd

richest 0.84 0.83 0.81 0.51 0.58 0.59 0.54 0.52 0.53

Richest 0.76 0.7 0.67 0.49 0.5 0.53 0.54 0.59 0.6

Sample 0.88 0.87 0.85 0.51 0.54 0.56 0.46 0.48 0.54

* Conditional on selling

** Quintile definition: 2006 income quintiles, adjusted for inflation and price differences at province level.

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Figure 1: Rice production and sales, 2006-2010.

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Share of hh growing rice Share of hh selling rice Share of rice sold (if selling)

2006 2008 2010

In Table 3 we use income quintiles for the base year (2006), adjusted for inflation and for price differences at province level, as an indicator of socio-economic status. On average, households selling rice are better off compared to those who grow but do not sell rice in both 2008 and 2010, while there is almost no difference in 2006.

Market participation shows some variation by income quintiles. The two richest quintiles are less likely to grow rice than the three poorest quintiles in all three years. Households in the three middle quintiles are consistently more likely to sell rice over the period. The proportion of households selling rice shows a slight increase in the poorest quintile between 2006 and 2010, and a more marked increase in all the other quintiles. As expected, richer households consistently sell a higher share of their rice in all three years. Over the period between 2006 and 2008, the year of a sharp rice price increase, the share of rice sold increases in the poorest and richest quintiles, while it declines slightly in the middle income groups. Over the 2006-2010 period, the share of rice sold increases for all quintiles except the second richest, but the increase is most marked for the three poorest quintiles. Figure 2 provides a visual summary of these trends. Figure 2: Share of rice sold by households selling rice, by income quintiles, 2006-2010

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0.1

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0.3

0.4

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Poorest 2nd poorest Middle 2nd richest Richest

2006 2008 2010

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Table 4 shows quantities produced and sold by rice sellers. Overall, the sample shows a small increase in the quantity of rice produced, while the quantity sold, conditional on selling, declines slightly between 2006 and 2008 and then increases by 11% between 2008 and 2010. Between 2006 and 2010, quantity produced increases for all quintiles except for the middle income quintile. The increase is most marked for the richest households. Quantity sold decreases for the middle and second richest quintiles, while it increases markedly for the other three. For the poorest quintile, the increase in quantity sold is much larger than the increase in quantity produced. Table 4: Rice quantities produced and sold (kg), 2006-2010, for rice sellers only, by income quintiles

Quantity produced Quantity sold

2006 2008 2010 Δ06-08 Δ06-10 2006 2008 2010 Δ06-08 Δ06-10 Income quintile

Poorest 2337.76 2586.24 2404.33 10.63% 2.85% 1029.15 1321.05 1396.68 28.36% 35.71%

2nd poorest 3389.28 3558.78 4003.69 5.00% 18.13% 1944.75 2055.81 2685.15 5.71% 38.07%

Middle 5499.89 4799.70 4621.37 -12.73% -15.97% 3798.98 3164.66 3218.38 -16.70% -15.28%

2nd richest 6670.68 6310.39 7088.86 -5.40% 6.27% 5229.58 4537.35 4771.76 -13.24% -8.75%

Richest 7602.18 9092.92 10045.15 19.61% 32.14% 6060.17 7373.26 8756.95 21.67% 44.50%

Sample 4767 4837 5098 +1% 6.94% 3286 3276 3638 -0.3% 10.71%

It is also interesting to look at differences in market participation across farm sizes. Mean farm size in the panel, measured as total operated land area, is about a hectare, but farm size seems to be declining over the period. We use median land area for each year as a threshold between smaller and larger farms. Table 5 shows that smaller farms are more likely to grow rice and less likely to sell in all three years. And they sell a smaller proportion of their output when they do, compared to larger farms. However, while the proportion of large farmers selling rice remains constant over the period, it increases for small farmers. Moreover, over the period 2006-2010 the share of rice sold by smaller farms increases by much more than for larger farms, showing that participation in the rice market is not just a large farm phenomenon.

Table 5: Rice market participation by total operated land area

Smaller Bigger

% of households 2006 2008 2010 2006 2008 2010

Grow rice 0.92 0.90 0.87 0.85 0.83 0.82

Sell rice 0.42 0.49 0.52 0.60 0.60 0.60 Share of rice sold 0.39 0.40 0.50

0.52 0.54 0.58

Median values for total operated land area (m

2): 2006 = 4412; 2008 = 4238; 2010 = 4100

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4.3. Cash crops

As Table 6 shows, the share of households producing cash crops declines slightly between 2006 and 2010, from 18 to 17%, while the share of household producing coffee remains stable at about 10% of all households engaged in crop production. However, quantities produced, both for all cash crops and for coffee alone, almost double between 2006 and 2010. With respect to geographical distribution, most cash cropping, and virtually all coffee production, is concentrated in the three Central Highlands provinces. Households producing cash crops and those producing coffee (looking at coffee producing provinces only) are consistently better off in all survey years in terms of both income and food expenditure per capita. The richest quintile is consistently more likely to produce cash crops and to grow coffee in all three years. The proportion of cash cropping households and of households growing coffee remains stable over the period in the poorest quintile. Over time, the proportion of households growing cash crops increases in the richest quintile while it declines slightly in the three middle income groups. Around 5% of smaller farmers produce cash crops in each survey year, against 30% among larger farmers.

Table 6: Share of households producing cash crops and coffee by province and income quintiles, 2006-2010

Cash cropping Coffee

2006 2008 2010 2006 2008 2010

Province

Ha Tay 0.02 0.01 0.02

Lao Cai 0.10 0.09 0.09

Phu Tho 0.22 0.18 0.17 0.01

Lai Chau 0.09 0.08 0.03

Dien Bien 0.01

Nghe An 0.21 0.15 0.18

Quang Nam 0.02 0.02 0.02

Khanh Hoa 0.19 0.24 0.19

Dak Lak 0.71 0.74 0.73 0.60 0.59 0.59

Dak Nong 0.76 0.76 0.76 0.70 0.68 0.68

Lam Dong 0.78 0.83 0.81 0.66 0.71 0.71

Long An 0.02 0.02 0.02

Income

quintiles

Poorest 0.11 0.11 0.11 0.04 0.05 0.05

2nd poorest 0.15 0.14 0.12 0.07 0.07 0.07

Middle 0.18 0.16 0.17 0.08 0.07 0.08

2nd richest 0.21 0.18 0.18 0.10 0.1 0.1

Richest 0.25 0.29 0.28 0.21 0.21 0.21

Sample 0.18 0.17 0.17 0.09 0.09 0.09

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Most cash cropping households also produce rice, but the proportion of households combining both types of crop production decreases slightly over time, from 59% of cash cropping households in 2006, to 55% in 2010. Less than a third of households combining cash cropping and rice production also sell rice. Mean rice quantity produced and sold by those cash cropping households that also sell rice is however lower than for non-cash cropping households, although at least in 2008 and 2010 cash cropping households tended to sell a higher share of their rice than non cash-cropping households.

In each of the measures of commercialization considered here, it is clear that there is a strong association between agricultural commercialization and household welfare; agricultural households that sell a higher proportion of their output and/or cultivate cash crops are better off on average than those that do not. However just based on this correlation it is not possible to draw any conclusions on causality. But it remains the case that, while the degree of participation and the extent of commercialisation with respect to rice has increased substantially over time for poorer households, they remain less likely to participate in cash cropping or coffee production than their richer counterparts. If one compares the rate of increase in per capita household income between households that sell any agricultural crops and those that do not, the rate of increase income is actually greater for those that did not sell in 2006 than for those that did. But if instead one focuses specifically on rice, income growth is greater for those that did sell rice in 2006 than those that did not. Rice is of course the most important crop for sale in Vietnam, and this suggests that those that sold in 2006 became significantly better off in subsequent years that those that did not.3 Of course this issue needs to be investigated much more carefully, addressing factors such as the channel of sale.

5. Household characteristics and agricultural commercialization: the role of assets, access to credit, transaction costs and household demographics

The purpose of this paper is to understand what are the factors that constrain household participation in agricultural output markets, and we conduct the analysis in two steps: in this section we start with a descriptive analysis, considering farm and household characteristics one at the time; in the next section we will then use multivariate analysis in order to allow for the effects of different characteristics to be considered simultaneously, thus enabling us to draw more robust conclusions about their relative importance.

The analysis in this section is based on the panel of 1733 households engaged in crop production. We begin by taking three snapshots of commercialising households in the panel, one for each survey year (2006, 2008 and 2010). We look at the characteristics of households focusing on the second and third concepts of

3 The failure to find that those selling anything in 2006 increased their income more than those that did

not is an unexpected result; it might for instance be influenced by people who adopted ash crops in

the intervening period, or non-selling households that diversified more out of agriculture. This will

be investigated more in subsequent work.

15

commercialization: those that are engaged in either rice sales, or cash cropping. We compare their mean values with those of their counterparts, i.e. households that grow rice but do not sell any of it; and households that do not produce cash crops, respectively. Tables 7 to 9 in the Appendix summarise the results. The descriptive analysis of farm and household characteristics shows several similarities across commercialising farmers and over time. Rice sellers, cash cropping households and coffee producers (the analysis for the latter is restricted to the three Central Highlands coffee provinces only) are all, on average, wealthier households and better endowed in terms of land, human and social capital. These households have a higher total income and a higher income from agriculture. Consistent with this, overall they also seem less likely to be poor according to the MOLISA definition. The proportion of poor households among rice sellers halves between 2006 and 2010. Coffee producers are also consistently less likely to be poor, in both years; the proportion of poor households declines among both coffee- and non-coffee-producing households over the period in the three Central Highlands provinces, but more so for coffee producers. Cash cropping households, on the other hand, are more likely to be poor in 2006, and less likely to be poor in both 2008 and 2010; also in this case the proportion of poor households declines more among cash cropping households compared to their counterparts over this period. This seems to suggest that commercialisation is an important part of households' livelihood strategies out of poverty. Commercialising households also operate more land, have a higher proportion of irrigated land, spend more on inputs and are more likely to hire labour, compared to their counterparts. They also tend to have a higher proportion of land subject to crop restrictions, i.e. where they are required by the state to grow rice in all or at least one season. This restriction is usually applied to the most productive land. While it is not surprising that households selling rice have a higher proportion of land subject to crop restrictions, the counter-intuitive result for cash cropping households might be explained by the fact that households facing crop restrictions are supplied by the authorities with higher quality inputs compared to other households (Markussen, Tarp et al. 2009). This may allow them to diversify crop production towards more input-intensive cash crops in the plots where they can choose what to grow. Social and human capital also seem to play a role in market participation behaviour: commercialising households are more likely to have access to extension services or agricultural training (although this does not hold for cash cropping households in 2006); cash cropping households and coffee producers are also more likely to be members of farmers' groups. Training and extension services can improve cultivation techniques and thus have a positive effect on output volume. Group membership gives households a number of benefits, including access to credit, learning from others, and information sharing, which can facilitate their agricultural activities in both production and marketing phases. There also are some important differences between groups of commercialising farmers with respect to their counterparts. In particular, ethnicity shows an interesting pattern. Rice sellers are more likely to belong to an ethnic minority in 2006, but more likely to be Kinh in both 2008 and 2010, compared to non-sellers,

16

suggesting that Kinh households may have been better able to take advantage of the increase in rice price over the period by starting to sell rice. Conversely, cash cropping households are consistently more likely to belong to an ethnic minority than their counterparts, while coffee producers are consistently more likely to be Kinh. The gender of the household head does not seem to differ substantially between rice sellers and non-sellers, but cash cropping households and coffee producers are consistently more likely to have a male head. Given the higher input requirements for these crops, this may suggest that female-headed households face problems in accessing the liquidity needed to buy inputs, for example through access to credit or wage employment of household members. Both rice sellers and cash cropping households are also consistently more likely to have borrowed something – either money or goods, including seeds. Finally, cash cropping and coffee households are closer to an all-weather road, while the distance is larger for rice sellers than non-sellers. This counter-intuitive result probably reflects differences in marketing options for rice and for cash crops: rice can more easily be sold to neighbouring households and local markets, while cash crops are more likely to be marketed through traders, therefore increasing the importance of household location with respect to transport infrastructure. In order to understand constraints to commercialisation, it is also important to follow the same households over time and observe their participation behaviour. In particular, we are interested in identifying which factors are more strongly correlated with mobility in market participation, i.e. with a household's decision to stop or to start participating in the output market. In order to explore this, we exploit the longitudinal dimension of the panel and look at changes in the market participation behaviour of the same household over time. There is relatively little mobility in both cash cropping and coffee production, which is expected given the initial investment in planting these crops: 78% of households producing cash crops in 2006 are still producing them in 2010, and this increases to 92% for coffee households. Less than 2% of panel households (32 households) begin cash crop production in 2010, while 2% stop producing them in 2010 (in this case, we expect this to mean that households still have the trees, but choose not to harvest). With respect to rice sales, 70% of panel households selling rice in 2006 also sell in 2010, but overall rice sales show higher mobility. About 20% of panel households were not selling rice in 2006 but are in 2010, while 15% of panel households were selling rice in 2006 and no longer are in 2010. About half of the rice sellers in 2010 have been consistently selling rice in each of the three survey years, and for these households both quantity produced and quantity sold increases over the period, and in 2010 both are about 17% higher than in 2006. As for the remaining households selling rice in 2010, 13% sell in 2006 but not in 2008; 18% start selling in 2008; and 16% start selling in 2010. Given the relatively higher mobility in rice sales, we will also focus on this aspect of market participation and seek to identify which characteristics seem to be more strongly associated with switching into and out of rice sales over time. We look at overall panel mobility between 2006 and 2010; in order to minimise issues of endogeneity, we measure household and farm characteristics at their mean

17

value in 2006, and Table 10 summarises the results. The key findings of this part of our descriptive analysis once again emphasise the importance of assets (in terms of physical, human and social capital), as well as location, for mobility in rice sales. Comparing households who are never selling over the survey period with households that were not selling rice in 2006 but are in 2010, we find that the latter already in 2006 had a larger land area devoted to crop production, more irrigated land, were more likely to own a means of transport, were more likely to be members of a farmers' union and to have had access to extension or training, and were living closer to an all-weather road. These households were also more likely to be non-poor and literate in 2006, and less likely to be of an ethnic minority. This pattern is confirmed also when looking at panel mobility broken down into two periods, 2006 to 2008, and 2008 to 2010 [results not reported here]. The picture provided by the characteristics of households that are no longer selling rice in 2010, compared to those who were selling in 2006 and still are in 2010, is almost a mirror-image to what described above, and one of relative lack of assets: already in 2006, these households operated a smaller land area, had lower access to irrigation and spent less on inputs; they were less likely to own a means of transport, to be literate and to have access to extension or training, while they were more likely to be poor and to be of an ethnic minority. Once again, this pattern is confirmed also when looking at panel mobility broken down into the two periods, 2006 to 2008, and 2008 to 2010. This suggests that while production scale, influenced by land area, irrigation and inputs use, is certainly a fundamental determinant of rice sales, it is not the only component of the commercialisation story. Differences in educational attainment (which can be considered a proxy for the ability to process information), availability of own means of transport and of extension and training services, as well as location, suggest that transaction costs, in particular transport and information costs, may also be relevant and may significantly constrain market participation. Understanding the relative importance of factors affecting production and of transaction costs for market participation has important policy implications if rural development strategies are to include an emphasis on increased commercialisation of agriculture. We now turn to investigating to what extent these initial findings are robust to multivariate analysis.

6. Econometric analysis

The first step of our econometric analysis is to use a probit model in order to identify the significant correlates to market participation for the 2006, 2008 and 2010 cross-sections. We estimate two separate models where the dependent variable takes the value of 1 if a household (i) sells rice or (ii) produces cash crops; and 0 otherwise. We recognise that agro-ecological characteristics and land suitability are a crucial determinant of cash cropping, in particular with respect to coffee production, and also that institutional variables such as restrictions in crop choice can significantly affect both diversification into cash cropping and rice sales. However, we are interested in identifying whether there are any individual characteristics that make households more likely to produce cash crops, or to sell rice, once we control for their geographical location and institutional constraints.

18

The explanatory variables used in these models include (a) household assets, including: total operated land area, defined as the area of all the plots operated by the households, except those used for residential purposes – this definition includes annual and perennial crops land, forest land, grassland and pasture, and land used for fishponds (we use this definition of operated land area in the attempt to address possible endogeneity between rice sales and land area devoted to crop or rice cultivation only); human capital, defined as literacy of the household head and household access to extension or training services; and social capital, defined as membership in farmers' or women's group; (b) access to credit; (c) proxies for transaction costs, including household distance from all-weather road; household ownership of own means of transport and of own means of communication; presence of a market in the commune; distance between market and commune centre; and (d) various household demographics, including household size, presence of at least one member engaged in off-farm wage labour, and the gender and ethnicity of the household head. Province fixed effects are included in all specifications. While many of these characteristics were considered individually in the previous section, the probit model enables the simultaneous effects of these different factors to be considered and therefore gives a more robust assessment of their importance. The results of the probit model are more easily interpreted in terms of marginal effects and their significance. These show the impact of each explanatory variable on the likelihood of a household, respectively, selling rice (model 1, Table 11), or producing cash crops (Model 2, Table 12). Tables 11 and 12 in the Appendix report marginal effects and their significance. Reported standard errors are based on the Huber–White estimator of variance, and are robust against many types of mis-specification of the model. Table 11 presents the results for rice sales in 2006, 2008 and 2010, using the cross-sections. The results with the strongest economic significance are those for factors likely to affect scale of production, in particular irrigation and operated land size: households with more land, and with more irrigated land, are significantly more likely to sell rice, in all years. This is consistent across food expenditure quintiles in all years, although the effect loses statistical significance and its magnitude decreases for households in the poorest quintile. As expected, crop restrictions and the presence of hired labour also have a positive and significant relationship with the probability of selling rice, in all years. Access to extension or training services also significantly increases the likelihood of selling rice, at least for 2006 and 2008. Overall, these results stress the importance of factors that are likely to increase production capacity, enabling households to decide to sell some of their output. With respect to demographic characteristics, in contrast with the descriptive analysis, it now appears that, once other factors are controlled for, minorities are significantly more likely to sell rice, at least in 2006 and 2008. On the other hand, larger households are less likely to sell rice in 2006, but this relationship turns not significant in 2008 and 2010, suggesting that households may be prepared to sell rice in those years regardless of whether or not they have surplus production, possibly responding to the increase in rice price.

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With respect to transaction costs, the presence of a daily market in the commune has the expected positive impact, although this is only statistically significant for 2008. On the other hand, households that are located further away from the nearest all-weather road are significantly more likely to sell rice, but only in 2006. This counter-intuitive result again might reflect the different marketing channels available to households depending on crop sold, and the relatively higher importance of sales to neighbouring households in the case of rice. Overall, the significance of variables affecting transaction costs seems to be lower than that of factors affecting rice production. Table 12 presents the results for the decision to produce cash crops, again using the 2006, 2008 and 2010 cross-sections. Once again, land area and crop restrictions have a positive and significant impact on the likelihood of producing cash crops in all years, and this is consistent across food expenditure quintiles over the whole period. The proportion of irrigated land has a significant and negative impact in 2008, consistent with the higher importance of irrigation for rice cultivation than for cash cropping. Access to credit, which may be needed in order to meet the higher input requirements for cash crops, has a positive and statistically significant impact in both 2006 and 2008. Land titling also has a positive effect on cash cropping, statistically significant in 2006 and 2010: security of tenure may encourage investment in planting crops with a relatively long growing time before yield increases, and this is in line with Do and Iyer's finding, using the 1993 and 1998 VLSS, that LUCs have a statistically significant, although economically moderate, effect on household investment in perennial crops (Do and Iyer 2008). Our results also show that overall transaction costs also play a role in the decision to produce cash crops: presence of a daily market in the commune has a positive and significant impact in 2006, and so does ownership of a means of transport in 2008. Speaking Vietnamese also has a positive and significant effect, at least for 2008, suggesting language barriers may be relevant when negotiating a transaction with trading partners. With respect to our proxies for social capital, the results show an interesting pattern. Membership of a women's union significantly increases the likelihood to produce cash crops in 2008, and then decreases it in 2010. Membership of a farmers' union doesn’t have any statistically significant effects on the full sample, but has a positive and statistically significant effect for households in the poorest food expenditure quintile. We also look at mobility in rice sales for panel households who are producing rice, and the picture that emerges from the multivariate analysis overall confirms the initial results of the descriptive analysis and especially the crucial role played by size of operated land. We divide the 2006-2010 period into two sub-periods: the first from 2006 to 2008, and the second from 2008 and 2010. For each of the two sub-periods, we run two models. The first one is run on a sub-sample consisting of households that sell in both years and households that stop selling in the second year; the dependent variable takes value of 1 if a household sells rice in the first year, and does not sell rice in the second year (switching out), 0 otherwise. The second model is run on a sub-sample consisting of households that never sell over the period under study, and households that start selling in the second year; the dependent variable takes value of 1 if the household is not selling rice in the first

20

year and starts selling in the second year (switching in), 0 otherwise. In each of these models, characteristics are measured at the level of the first year of the sub-period (i.e. we use 2006 characteristics for the 2006-08 period and 2008 characteristics for the 2008-10 period) in order to minimise endogeneity problems. Table 13 reports the results. The likelihood of a household starting to sell rice increases with land area, in both sub-periods. For the 2006-2008 sub-period, households who in 2006 own a means of transport, are of an ethnic minority and have a female household head, are more likely to switch into rice sales in 2008. With respect to the 2008-2010 period, households that in 2008 hold a land certificate, have at least one household member earning a wage income, and whose household head can read and write are more likely to switch into rice sales in 2010. The likelihood of a household stopping to sell rice decreases if at least one household member belongs to a women’s union and if the household head speaks Vietnamese, in both sub-periods. For the 2006-2008 sub-period, the lower the proportion of irrigated land in 2006, the higher is the likelihood of switching out of rice sales in 2008. Over the 2008-2010 sub-period, households with more land and with hired labour in 2008 are less likely to stop selling rice in 2010. These results on mobility further reinforce the importance of physical, human and social capital assets for market participation.

7. Channels of sale

We now briefly discuss the channels through which households sell their outputs. Most households that sell cash crops sell to traders or enterprises, but there is significant variation in the channels of rice sales. Here many households sell to households and individuals as well as to traders and enterprises. Sales to households and individuals presumably capture, among other things, sales in the (village; commune) market, and to neighbours. In the following we focus on channels of sale for rice, and specifically on households selling to other households and individuals; and on households selling to traders and enterprises. Table 14 reports the proportion of households selling to traders and to individuals for 2008 and 2010.4 The majority of households selling rice in 2008 sold to traders (66%), but in 2010 this share had fallen and in that year 56% sold to individuals. Provinces where more households are selling rice, and where output scale is larger, might be thought to be more likely to attract traders or enterprises; however, a preliminary descriptive examination of the data does not suggest a clear association between average quantity of rice produced and sold by households and predominance of sales through traders, in either year. In 2010, most households sell to traders in Dien Bien, Dak Nong, Lam Dong and Long An. Sales to households are highly predominant in Ha Tay, Lao Cai and Khanh Hoa. The share of households selling to traders is lower in 2010 than it was in 2008 in most provinces.

4 Data for 2006 do not allow to distinguish clearly between channels of sale for each crop and for this

reason we decided to focus here on 2008 and 2010 only.

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However, looking at differences at the household level between those selling to traders and those selling to individuals reveals a clearer picture (Table 15), and suggests that channels of sale also reflect different degrees of commercialisation of households, with larger scale, more established rice sellers being more likely to sell to traders, while smaller scale, less well-off producers with more mobility in their participation behaviour seem to be more likely to sell to households. Households selling to traders tend to sell a much higher quantity on average, and a larger share of total rice produced, in both years (4 times bigger in 2008, almost 5 times bigger in 2010); further analysis shows that this holds across provinces, with a few exceptions. Over time between 2008 and 2010 the mean quantity produced decreases slightly for households selling to individuals while it increases by 35% for those selling to traders. Quantity sold increases slightly for households selling to individuals, while it increases by 40% for those selling to traders. In addition households that switch in or out or rice selling are more likely to sell to individuals than those who sell consistently. Households selling to a trader have a higher income and a higher income from agriculture, and are less likely to be poor, in both years; their total operated land area is bigger (almost twice as large in 2010); a larger proportion is irrigated; and a lower share is subject to crop restrictions. They spend about three times as much on inputs and are more likely to hire labour. They are more likely to borrow something and to have a land use certificate. They are more likely to be male, slightly more likely to speak Vietnamese and to be literate. Somehow counter intuitively, they are located further away from main roads compared to households selling to individuals, but they are likely to own their own transport and telephone. They are more likely to have access to extension services in both years, to be members of a farmers’ union in 2008 but not in 2010, and to be in a women’s union in both years. The price rice producers receive when selling to traders is slightly lower on average than those selling to individuals, but the standard deviation for the latter is also bigger, suggesting that the latter may be more subject to seasonal price fluctuations. In general the picture is that those selling to traders are more established, larger scale producers, who sell consistently over time. Those selling to individuals tend to be smaller scale producers, selling smaller amounts and often less frequently. Traders are often well represented in provinces where levels of production are high (most strikingly in Long An), though this is not always the case (e.g Khanh Hoa in both years or Dak Lak in 2010). There is some evidence of a reduction in those selling to traders in 2010 compared to 2008.

8. Conclusions

Without doubt Vietnam has made impressive progress in agricultural commercialisation over the past 25 years. Significant numbers of households are now growing cash crops, and many households also sell rice, either regularly (where they often sell larger amounts to a trader) or from time to time (when they are more likely to sell smaller amounts to individuals or households). There is also little doubt that those households that sell agricultural output are better off than those that do

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not, although it is not possible to draw conclusions on causality based on this observation. It is also interesting to observe an increase in both participation and in the extent of commercialisation with respect to rice among households in the poorest quintile. It remains the case that quite a few households are not selling output, or are only doing so in some years but not others. There are some geographic dimensions to this; commercialisation is well developed in Long An and in the cash crop growing areas of the Central Highlands, whereas the level of commercialisation in some areas of the north, while still substantial, is less.

There are some important factors associated with commercialisation and some we would pick out here are land size, the policy of crop restrictions, the existence of local markets, access to extension and membership of farmers or women's unions.

In relation to land, results for both cash crops and rice sales seem to suggest a consolidation message. But it is not obvious whether the benefit of increases commercialisation because of bigger size outweighs the cost of there being fewer people selling. Also, the story is a bit more complex, because for quite a few provinces there seems to be a negative relationship between total operated land area and probability of selling rice, especially for 2006 and 2008, suggesting that smaller farms may be more likely to sell rice in those provinces in those years; it is unclear whether this might be a poverty story. Interestingly the presence of crop restrictions seems to have positive effect on both cash cropping and rice sales, although the story may be more complex. The addition of interaction terms in the regression showed that for several provinces and especially for 2006, a higher proportion of land subject to crop restrictions reduces the probability of selling rice. It is not obvious though why this should be the case. The presence of market facilities in the commune has a positive effect in 2006 and 2008, although surprisingly not in 2010 except in some provinces (Phu Tho, Nghe An, Dak Lak and Long An). Extension and training services seem to have a positive effect in 2010 and in most provinces in 2008, but this does not seem to be a consistent story; potentially there are important questions about how these programs are organised and administered, who decides the focus, and whether the focus changes from year to year. Likewise the impact of union membership (farmers; women), while mostly positive, is not homogeneous across provinces and over time; again the question arises about how are the unions organised, whether the focus of their operations changes over time, and how it is determined.

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Appendix

Table 7: Rice sellers 2006-2010, selected characteristics.

2006 2008 2010

Yes No Yes No Yes No

Mean income from agriculture 9486.32 6442.03 17385.40 11508.97 23332.18 17859.38

Mean total income 21764.20 21567.15 38293.78 33792.02 75063.23 69624.92

Share of poor households (MOLISA) 0.26 0.30 0.21 0.32 0.13 0.17

Total cultivated land area (ha) 13292.21 7999.21 10644.91 6914.84 9945.09 6921.96

Land area for crop production (ha) 9988.73 4864.57 8585.66 4628.60 7689.55 4994.37

Proportion of irrigated land 0.80 0.76 0.84 0.70 0.85 0.75

Proportion of land subject to crop restrictions 0.66 0.68 0.57 0.53 0.40 0.38

Total input expenditure (000 VND) 6964.51 2597.69 26153.71 8050.86 28528.02 10533.39

Total input expenditure, rice only (000 VND) 10835.62 2485.94

Share of hh hiring labour 0.40 0.23 0.57 0.34 0.64 0.39

Share of hh hiring labour, rice only 0.60 0.36

Share of hh who borrowed something 0.72 0.65 0.48 0.46 0.55 0.47

Share of hh with LUC 0.92 0.92 0.87 0.87 0.83 0.78

Household size 4.88 4.67 4.72 4.81 4.47 4.58

Share of hh of Kinh ethnicity 0.72 0.80 0.78 0.70 0.79 0.69

Share of hh who speak Vietnamese 0.96 0.97 0.96 0.97 0.99 0.98

Share of hh with male head 0.84 0.82 0.82 0.83 0.82 0.83

Age of hh head 52.31 51.60

Share of hh whose head can read or write or both 0.88 0.90 0.91 0.89 0.70 0.61

Mean distance from nearest all-weather road (km) 1.85 0.95 3.65 2.86 3.05 2.71

Share of hh who own a telephone 0.12 0.14 0.42 0.40 0.62 0.68

Share of hh who own a means of transport 0.87 0.88 0.94 0.91 0.94 0.91

Share of hh who had access to extension/training 0.43 0.38 0.30 0.20 0.55 0.53

Share of hh who are member of farmers' union 0.53 0.56 0.52 0.48 0.51 0.57

Share of hh who are member of women's union 0.66 0.73 0.72 0.72 0.71 0.71

N 774 756 813 687 822 648

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Table 8: Cash cropping households 2006-2010, selected characteristics.

2006 2008 2010















Household size 4.90 4.72 4.94 4.67 4.74 4.41












N 306 1427 288 1445 288 1445

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Table 9: Coffee producing households in Central Highland Provinces 2006-2010, selected characteristics

2006 2008 2010















Household size 5.14 5.07 5.21 4.97 4.97 4.68












N 160 89 160 89 167 82

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Table 10: Panel mobility in rice sales, 2006-2010, selected characteristics

Mean values for 2006

Both years Switch out Switch in Never

Mean income from agriculture 9457.57 8518.67 6028.93 6470.16

Mean total income 21521.76 18342.88 22123.15 20938.19

Share of poor households (MOLISA) 0.24 0.31 0.26 0.31

Total cultivated land area (ha) 13030.31 12584.90 7022.79 8573.48

Land area for crop production (ha) 10281.81 7626.31 5183.72 4472.29

Proportion of irrigated land 0.83 0.70 0.78 0.74

Proportion of land subject to crop restrictions 0.68 0.64 0.65 0.70

Total input expenditure (000 VND) 8643.29 2814.29 2603.92 2483.22

Share of hh hiring labour 0.44 0.26 0.26 0.20

Share of hh who borrowed something 0.73 0.69 0.67 0.64

Share of hh with LUC 0.93 0.90 0.93 0.91

Household size 4.82 5.05 4.73 4.72

Share of hh of Kinh ethnicity 0.78 0.57 0.83 0.77

Share of hh who speak Vietnamese 0.97 0.93 0.99 0.97

Share of hh with male head 0.85 0.85 0.82 0.83

Share of hh whose head can read or write or both 0.91 0.80 0.91 0.88

Mean distance from nearest all-weather road (km) 1.89 1.84 0.93 0.95

Share of hh who own a telephone 0.11 0.10 0.12 0.14

Share of hh who own a means of transport 0.90 0.78 0.93 0.86

Share of hh who had access to extension/training 0.46 0.40 0.42 0.35

Share of hh who are member of farmers' union 0.54 0.55 0.60 0.54

Share of hh who are member of women's union 0.66 0.68 0.75 0.74

N 522 220 287 407

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Table 11: Regression results: Probit model for the probability of selling rice – cross-sections 2006, 2008, 2010

Dependent variable: household sells rice (1 = yes) 2006 2008 2010

Proportion of land subject to crop restrictions 0.067* 0.076** -0.099***

(0.035) (0.038) (0.035)

Log of operated land area 0.093*** 0.090*** 0.148***

(0.023) (0.021) (0.020)

Proportion of irrigated land 0.189*** 0.294*** 0.211***

(0.055) (0.049) (0.047)

Household borrowed something (1= yes) 0.019 0.003 0.032

(0.030) (0.027) (0.026)

Household has a LUC -0.002 -0.002 -0.004

(0.049) (0.039) (0.032)

Distance from nearest all-weather road (km) 0.016*** 0.000 0.001

(0.005) (0.001) (0.002)

Roads passable by cars in most villages of the commune (1 = yes) 0.030 0.001 -0.000

(0.040) (0.001) (0.000)

Presence of a daily market in the commune (1 = yes) 0.013 0.109*** 0.017

(0.030) (0.031) (0.031)

Use of hybrid seed (1 = yes) 0.132*** -0.039 -0.018

(0.036) (0.034) (0.028)

Hh experienced pest invasion or crop disease (1 = yes) -0.054* -0.090***

(0.032) (0.028)

Total input expenditure (000 VND) 0.000 0.000 0.000

(0.000) (0.000) (0.000)

Household hires labour (1 = yes) 0.105*** 0.102*** 0.103***

(0.033) (0.029) (0.027)

Wage income (1 = yes) -0.018 -0.029 -0.033

(0.029) (0.028) (0.027)

Household size -0.020** 0.001 -0.008

(0.010) (0.008) (0.008)

Household is member of a farmers' union -0.048 0.017 -0.059**

(0.031) (0.029) (0.028)

Household is member of a women's union 0.014 0.019 0.002

(0.034) (0.030) (0.028)

Access to extension or training services (1 = yes) 0.052* 0.080** 0.018

(0.030) (0.032) (0.027)

Household owns a radio (1 = yes) -0.033 -0.026 0.006

(0.036) (0.033) (0.035)

Household owns a means of transport (1 = yes) 0.007 0.029 0.052

(0.048) (0.047) (0.042)

Ethnicity of household head (1 = Kinh) -0.122** -0.129*** -0.020

(0.053) (0.048) (0.046)

Gender of household head (1 = male) -0.029 0.024 0.023

(0.040) (0.039) (0.040)

Household head speaks Vietnamese (1 = yes) -0.129 -0.038 0.077

(0.095) (0.062) (0.063)

Household is poor (MOLISA definition, 1 = yes) -0.016 -0.001 -0.099***

(0.030) (0.022) (0.035)

Age of household head -0.000 0.001 -0.001

(0.001) (0.001) (0.001)

Household head can read and write (1 = yes) 0.032 0.057 -0.033

(0.052) (0.047) (0.040)

Observations 1,620 1,693 1,900

Pseudo-R2 0.184 0.139 0.153

Chi2 317.5 239.0 337.4

Log Likelihood -916.7 -1010 -1113

Reported results are marginal effects; Robust standard errors in parentheses; *** p<0.01, ** p<0.05, * p<0.1. All models include province fixed-effects.

28

Table 12: Regression results: Probit model for the probability of producing cash crops. Cross-sections 2006, 2008, 2010

Dependent variable: household produces cash crops (1 = yes) 2006 2008 2010

Proportion of land subject to crop restrictions 0.064*** 0.178*** 0.108***

(0.020) (0.027) (0.020)

Log of operated land area 0.068*** 0.062*** 0.052***

(0.009) (0.011) (0.011)

Proportion of irrigated land 0.042 -0.059** 0.012

(0.025) (0.028) (0.028)

Household borrowed something (1= yes) 0.025* 0.039** 0.022

(0.015) (0.017) (0.015)

Household has a LUC 0.041* 0.032 0.049***

(0.021) (0.023) (0.019)

Distance from nearest all-weather road (km) -0.001 0.001 0.001

(0.001) (0.001) (0.001)

Roads passable by cars in most villages of the commune (1 = yes) -0.030 0.000 0.000*

(0.020) (0.000) (0.000)

Presence of a daily market in the commune (1 = yes) 0.039*** 0.002 0.021

(0.014) (0.019) (0.016)

Total input expenditure (000 VND) 0.000 0.000** 0.000**

(0.000) (0.000) (0.000)

Household hires labour (1 = yes) 0.011 0.023 -0.006

(0.016) (0.018) (0.016)

Wage income (1 = yes) -0.010 -0.017 -0.006

(0.013) (0.017) (0.016)

Household size -0.007* -0.004 -0.001

(0.004) (0.005) (0.004)

Household is member of a farmers' union -0.004 -0.022 0.019

(0.014) (0.017) (0.016)

Household is member of a women's union -0.001 0.052*** -0.037**

(0.016) (0.017) (0.019)

Access to extension or training services (1 = yes) 0.004 -0.001 0.003

(0.015) (0.019) (0.016)

Household owns a radio (1 = yes) 0.015 -0.017 0.012

(0.016) (0.019) (0.019)

Household owns a means of transport (1 = yes) 0.011 0.058** 0.005

(0.023) (0.025) (0.029)

Ethnicity of household head (1 = Kinh) 0.012 0.027 0.007

(0.019) (0.022) (0.022)

Gender of household head (1 = male) 0.003 0.013 0.004

(0.020) (0.025) (0.024)

Household head speaks Vietnamese (1 = yes) 0.002 0.091*** 0.038

(0.029) (0.029) (0.030)

Household is poor (MOLISA definition, 1 = yes) 0.043*** 0.011 -0.018

(0.012) (0.015) (0.020)

Age of household head -0.000 0.000 -0.001

(0.001) (0.001) (0.001)

Household head can read and write 0.022 -0.004 -0.001

(0.021) (0.033) (0.027)

Observations 1,758 1,799 2,178

Pseudo-R2 0.469 0.582 0.580

Chi2 432.3 641.9 859.8

Log Likelihood -448.5 -416.1 -480.8


29

Table 13: Regression results for mobility in rice sales

Switch in Switch out Benchmark category Never sell rice over the sub-period Always sell rice over the sub-period Sub-period 2006-08 2008-10 2006-08 2008-10

Proportion of land subject to crop restrictions 0.043 -0.032 -0.072 0.060

(0.050) (0.060) (0.047) (0.057)

Log of operated land area 0.049* 0.097*** -0.027 -0.066*

(0.027) (0.032) (0.028) (0.036)

Proportion of irrigated land 0.018 -0.047 -0.192*** -0.108

(0.074) (0.078) (0.066) (0.076)

Household borrowed something (1= yes) -0.043 -0.007 -0.053 0.053

(0.044) (0.048) (0.039) (0.039)

Household has a LUC -0.069 0.127* 0.032 0.026

(0.079) (0.075) (0.060) (0.066)

Distance from nearest all-weather road (km) -0.014 0.002 -0.010 0.003

(0.018) (0.004) (0.006) (0.003)

Roads passable by cars in most villages of the commune (1 = yes) 0.045 -0.000 0.010 0.000

(0.059) (0.001) (0.050) (0.001)

Presence of a daily market in the commune (1 = yes) 0.022 -0.058 -0.043 -0.008

(0.042) (0.049) (0.039) (0.041)

Use of hybrid seed (1 = yes) 0.095 0.113* 0.007 0.053

(0.058) (0.063) (0.043) (0.049)

Hh experienced pest invasion or crop disease (1 = yes) 0.035 0.017

(0.053) (0.049)

Total input expenditure (000 VND) 0.000 0.000 -0.000 -0.000

(0.000) (0.000) (0.000) (0.000)

Household hires labour (1 = yes) -0.026 0.035 0.003 -0.128***

(0.050) (0.053) (0.041) (0.044)

Wage income (1 = yes) -0.028 0.117** 0.057 -0.059

(0.043) (0.050) (0.036) (0.042)

Household size -0.012 -0.005 -0.011 -0.003

(0.014) (0.015) (0.011) (0.014)

Household is member of a farmers' union 0.044 -0.027 -0.036 0.007

(0.045) (0.050) (0.039) (0.043)

Household is member of a women's union 0.006 -0.093 -0.084** -0.083*

(0.049) (0.058) (0.042) (0.045)

Access to extension or training services (1 = yes) -0.009 -0.048 -0.001 0.056

(0.043) (0.056) (0.036) (0.047)

Household owns a radio (1 = yes) 0.076 -0.044 0.019 0.004

(0.057) (0.059) (0.048) (0.047)

Household owns a means of transport (1 = yes) 0.126* 0.053 -0.055 -0.034

(0.072) (0.093) (0.057) (0.081)

Ethnicity of household head (1 = Kinh) -0.237*** 0.050 0.011 0.085

(0.069) (0.093) (0.072) (0.071)

Gender of household head (1 = male) -0.094* -0.023 -0.054 0.024

(0.055) (0.068) (0.053) (0.054)

Household head speaks Vietnamese (1 = yes) -0.122 -0.011 0.164** -0.254*

(0.149) (0.185) (0.068) (0.147)

Household is poor (MOLISA definition, 1 = yes) 0.001 0.029 0.007 -0.012

(0.041) (0.045) (0.038) (0.041)

Age of household head 0.004** -0.001 0.002 -0.002

(0.002) (0.002) (0.002) (0.002)

Household head can read and write (1 = yes) -0.121 0.168* -0.069 -0.101

(0.084) (0.094) (0.061) (0.084)

Observations 657 697 480 597

Pseudo-R2 0.103 0.185 0.129 0.174

Chi2 82.17 142.4 77.14 120.7


30

Table 14: Households selling rice; quantity produced and sold; share of households by channel of sales used; 2010 and 2008

2010 N of hh selling rice

Qt produced by hh selling Qt sold if selling

% of hh selling to traders

% of hh selling to individuals

Ha Tay 202 2237.88 955.00 13.93 86.07

Lao Cai 42 2693.26 967.40 4.76 92.86

Phu Tho 77 2037.58 820.26 57.14 40.26

Lai Chau 29 2617.00 1075.86 41.38 55.17

Dien Bien 50 2535.80 1094.18 72.00 28.00

Nghe An 45 2019.29 1050.93 37.78 60.00

Quang Nam 175 1790.30 1074.46 32.57 67.43

Khanh Hoa 8 4075.00 2631.25 25.00 75.00

Dak Lak 33 6165.73 5880.30 42.42 57.58

Dak Nong 16 3827.63 2868.75 68.75 31.25

Lam Dong 10 2371.00 1771.00 80.00 20.00

Long An 135 18823.14 15510.48 91.04 6.72

2008

Ha Tay 188 2347.96 1045.36 48.40 51.60

Lao Cai 35 2572.74 627.11 14.71 85.29

Phu Tho 88 1747.94 430.80 35.23 60.23

Lai Chau 36 2891.81 941.67 50.00 50.00

Dien Bien 40 3396.72 1513.25 36.84 60.53

Nghe An 60 2784.83 1076.67 78.33 21.67

Quang Nam 145 2042.23 959.07 97.20 2.10

Khanh Hoa 12 3434.58 1200.00 100

Dak Lak 39 4211.46 3143.59 74.36 25.64

Dak Nong 15 5946.67 4256.67 85.71 14.29

Lam Dong 11 1918.18 1436.36 90.91 9.09

Long An 144 15476.14 13141.90 93.75 5.56

31

Table 15: Household characteristics by channel of sales used

2008 2010

Channel of sales Channel of sales

household trader household trader

Mean income from agriculture 15469.96 18455.26 17874.62 29044.82

Mean total income 34054.85 40609.63 63238.53 88746.24

Share of agriculture over total income 0.52 0.51 0.29 0.33

Share of poor households (MOLISA) 0.29 0.17 0.14 0.12

Total cultivated land area (ha) 9475.06 11245.45 6978.56 13468.82

Land area for crop production (ha) 6929.90 9452.01 5203.80 10628.50

Proportion of irrigated land 0.82 0.85 0.83 0.85

Proportion of land subject to crop restrictions 0.58 0.57 0.44 0.34

Total rice quantity produced 2670 6008 2408 8142

Total rice quantity sold 1092 4437 1284 6233

% of rice sold if selling 35 54 48 63

Total input expenditure (000 VND) 11750.04 33780.30 13168.91 46419.05

Share of hh hiring labour 0.47 0.63 0.62 0.63

Share of hh who borrowed something 0.47 0.49 0.47 0.63

Share of hh with LUC 0.86 0.87 0.77 0.89

Household size 4.90 4.61 4.44 4.46

Share of hh of Kinh ethnicity 0.63 0.87 0.80 0.76

Share of hh who speak Vietnamese 0.92 0.98 0.99 1.00

Share of hh with male head 0.81 0.82 0.79 0.85

Age of hh head 50.86 51.85 52.94 51.57 Share of hh whose head can read or write or both 0.89 0.92 0.91 0.93 Mean distance from nearest all-weather road (km) 2.68 4.08 2.04 4.39

Share of hh who own a telephone 0.39 0.44 0.57 0.70

Share of hh who own a means of transport 0.90 0.96 0.93 0.95 Share of hh who had access to extension/training 0.22 0.34 0.54 0.55

Share of hh who are member of farmers' union 0.45 0.55 0.54 0.47 Share of hh who are member of women's union 0.67 0.75 0.68 0.73

32

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