economic impacts of international migration and remittances on household welfare in vietnam

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Economic impacts of international migration and remittances on household welfare in Vietnam Nguyen Viet Cuong National Economics University, Hanoi, Vietnam, and Daniel Mont World Bank, Hanoi, Vietnam Abstract Purpose – The purpose of this paper is to examine the impact of international remittances on different household welfare indicators including child education, assets, durable goods, and reservation wages of other working age household members. It examines how international remittances are spent for production and consumption by receiving households. Design/methodology/approach – This paper uses fixed-effect regressions to estimate the impact of international remittances on household spending in Vietnam using Vietnam Household Living Standard Surveys 2006 and 2008. Findings – It is found that most of international remittances are spent on housing and land, debt repayment and saving. A small proportion of remittances are used to buy durable goods. Remittances are not spent in production as well as living consumptions. The effect of international remittances on consumption-based poverty is very limited. Originality/value – The findings from this paper suggest that current international remittances are not an effective measure for poverty reduction in the short-run in Vietnam. Keywords Migration, Remittances, Impact evaluation, Household welfare, Poverty, Vietnam, Welfare Paper type Research paper 1. Introduction The main objective of migration is to increase income and reduce the risks of an uncertain income stream (Harris and Todaro, 1970; Stark, 1980, 1991; Katz and Stark, 1986; Stark and Taylor, 1991). As a source of labor for destination countries, a source of work experience and income generation for migrants, and a source of remittances for countries of origin, migration has the capacity for both broad and deep impacts. The most direct impact of migration is increased income, mainly through remittances (McKenzie and Sasin, 2007). Remittances sent by migrants are remarkable capital flows for migrant-sending households, especially in developing countries. Migrants send remittances to their households in home areas for different reasons (Stark and Bloom, 1985; Stark, 1995; Lucas and Stark, 1985; Cox, 1987, 1990). The most often cited motives are altruism, exchange and insurance. The altruism motive assumes that people give transfers to others because of care and love. The exchange motive theory argues that people give transfers to other because they want to get some The current issue and full text archive of this journal is available at www.emeraldinsight.com/1446-8956.htm JEL classification – O15, R23, I32 IJDI 11,2 144 International Journal of Development Issues Vol. 11 No. 2, 2012 pp. 144-163 q Emerald Group Publishing Limited 1446-8956 DOI 10.1108/14468951211241137

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Economic impacts ofinternational migration and

remittances on household welfarein VietnamNguyen Viet Cuong

National Economics University, Hanoi, Vietnam, and

Daniel MontWorld Bank, Hanoi, Vietnam

Abstract

Purpose – The purpose of this paper is to examine the impact of international remittances ondifferent household welfare indicators including child education, assets, durable goods, andreservation wages of other working age household members. It examines how internationalremittances are spent for production and consumption by receiving households.

Design/methodology/approach – This paper uses fixed-effect regressions to estimate the impactof international remittances on household spending in Vietnam using Vietnam Household LivingStandard Surveys 2006 and 2008.

Findings – It is found that most of international remittances are spent on housing and land, debtrepayment and saving. A small proportion of remittances are used to buy durable goods. Remittancesare not spent in production as well as living consumptions. The effect of international remittances onconsumption-based poverty is very limited.

Originality/value – The findings from this paper suggest that current international remittances arenot an effective measure for poverty reduction in the short-run in Vietnam.

Keywords Migration, Remittances, Impact evaluation, Household welfare, Poverty, Vietnam, Welfare

Paper type Research paper

1. IntroductionThe main objective of migration is to increase income and reduce the risks of anuncertain income stream (Harris and Todaro, 1970; Stark, 1980, 1991; Katz and Stark,1986; Stark and Taylor, 1991). As a source of labor for destination countries, a source ofwork experience and income generation for migrants, and a source of remittances forcountries of origin, migration has the capacity for both broad and deep impacts.

The most direct impact of migration is increased income, mainly throughremittances (McKenzie and Sasin, 2007). Remittances sent by migrants are remarkablecapital flows for migrant-sending households, especially in developing countries.

Migrants send remittances to their households in home areas for different reasons(Stark and Bloom, 1985; Stark, 1995; Lucas and Stark, 1985; Cox, 1987, 1990). The mostoften cited motives are altruism, exchange and insurance. The altruism motiveassumes that people give transfers to others because of care and love. The exchangemotive theory argues that people give transfers to other because they want to get some

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1446-8956.htm

JEL classification – O15, R23, I32

IJDI11,2

144

International Journal of DevelopmentIssuesVol. 11 No. 2, 2012pp. 144-163q Emerald Group Publishing Limited1446-8956DOI 10.1108/14468951211241137

benefits in return (Cox, 1987). Migrants might send remittances so that the recipientswill take care of the assets or family of the migrants. Remittances are also sent to investin physical and social assets. The insurance theory argues that in the absence ofcomplete credit markets, migration is a strategy households use to cope with economicrisks or shocks (Stark and Levhari, 1982; Stark and Bloom, 1985; Rosenzweig, 1988).Migrants remit money when their home people experience decreases in income, but themigrants might also receive money or other assistance from their home when they loseemployment or suffer a reduction in income.

In addition to positive impacts on consumption, income and other physical capital,migration can have positive effects on human capital such as transfers of informationand advanced knowledge about production skills and technology and awareness of theimportant role of education as well as child care (McKenzie and Sasin, 2007).

However, migration can lead to negative effects. For example, fewer adults at homemay have a negative impact on the next generation. With less care from adults,children have poorer educational attainment and health, and might have to take morehousework. Migration can also prevent these households from high-return but laborintensive activities (Taylor and Lopez-Feldma, 2007). Moreover, remittances can createa moral hazard problem, since they can lead to work disincentives (Farrington andSlater, 2006; Lloyd-Sherlock, 2006; Sahn and Alderman, 1996). In an extreme case,non-migrants would have earned higher income if they had not received remittances.

Empirical findings on the sign as well as the magnitude of the impact of migrationon household welfare are not consistent. For example, Adams and Page (2005) foundthe strongly positive correlation between international remittances and povertyreduction in developing countries. At the country level, positive impacts of remittances,especially international remittances, on household welfare and poverty reduction werealso found in some studies such as Adams (1991, 2004, 2006), Taylor et al. (2005) andAcosta et al. (2007). However, Azam and Gubert (2006)’ find that in Mali and Senegalmigrants mainly come from rich families, so rich families receive most remittances.Yang (2004) finds that migration reduced the labor supply of non-migrants inPhilippines. McKenzie and Rapoport (2006) found that migration had a negative impacton the schooling ratio of children in Mexico.

In Vietnam, both internal and international migration have been increasing rapidly.According to the 1999 Population and Housing Census, around 6.5 percent of thepopulation over five years old changed their residence during 1994-1999 (Dang et al.,2003). According to the 1998 Vietnam Living Standard Survey (VLSS) and the 2002Vietnam Household Living Standard Survey (VHLSS), the share of the urban populationincreased from 22 to 27 percent during 1998-2006. Currently, 3.2 million Vietnamese livepermanently in other countries. The number of annual exported laborers increased by136 percent from 36 to 85 thousand during 2001-2007 (Labor Newspaper, 2008; Nguyenand Mont, 2010). International remittances have been increasing remarkably over time.During the period 1999-2008 the amount of international remittances increased from1.2 to 8 billion USD (Nguyen-Hung, 2009). The ratio of international remittances to GDPincreased from 4.3 percent in 1999 to 8.5 percent in 2008.

Most studies argue that the main reason for economic migration in Vietnam is to findbetter employment and higher wages (Dang et al., 2003; Cu, 2005; Brauw and Harigaya,2007). Industrialization and high economic growth in the urban areas increasinglyattract rural labors (Dang et al., 1997; Dang, 2001; Cu, 2005). Large flows of foreign direct

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investment into many industrial zones and companies create more employment for ruralpeople. In addition, there are more landless or near landless households (Ravallion andvan de Walle, 2006). The shortage of land can push farmers into non-farm employmentin other locations (Cu, 2005). For international migration, most exported labors areleaving for higher incomes.

While most studies in Vietnam focus on the pattern and determinants of migration(Guest, 1998; Djamba et al., 1999; Dang et al., 1997, 2003; Dang, 2001; General StatisticsOffice of Vietnam (GSO) and United Nation Population Fund (UNFPA), 2005; Cu, 2005;Dang and Nguyen, 2006; Nguyen-Minh, 2008). Few studies measure the quantitativeimpacts. The first to do so was Brauw and Harigaya (2007), who measured the impactof seasonal migration using the VLSS 1993 and 1998. The second was by Nguyen et al.(2008), who evaluated the impact of long-term migration on household expenditureusing VHLSS in 2002-2004. Recently, Nguyen et al. (2009) measured the impact of workmigration and non-work migration on household welfare and poverty using VHLSS in2004-2006. These studies found a positive impact of migration on householdexpenditure. Regarding international remittances, most studies focus on the impact ofinternational remittances on poverty. Using VHLSS in 2002-2004, Nguyen (2008) foundthat international remittances helped receiving household increase consumption andreduce poverty. It should be noted that in Vietnam remittances come from bothtemporary migrants – who have migrated relatively recently – and permanentmigrants, most of whom migrated at the end of the war in the 1970s.

However, there have been no studies in Vietnam on the impact of migration andremittances on other household welfare indicators such as investment in education,assets, household infrastructure and durable goods, and reservation wages of otherworking age household members.

The objective of the paper is to examine the impact of international remittances ondifferent household welfare indicators including child education, assets, durable goods,and reservation wages of other working age household members. It examines howinternational remittances are spent for production and consumption by receivinghouseholds. Data used in this paper are from the most two recent VHLSSs 2006 and 2008.

The paper is structured into five sections. After this introduction, Section 2introduces the data set used in this paper. Section 3 describes the pattern ofinternational migration and remittances in Vietnam. Section 4 presents the estimationof international remittances on household welfare. Finally, the Section 6 concludes.

2. Data sourcesIn this study, we use data from two recent VHLSSs in 2006 and 2008. The VHLSSswere conducted by the GSO with technical support from the World Bank (WB). Eachsurvey covered around 9,189 households. The samples are representative for thenational, rural and urban, and regional levels. The two surveys set up two-period panelsub-samples of around 4,200 households[1].

The surveys collected information through household and community levelquestionnaires. Information on households includes basic demography, employmentand labor force participation, education, health, income, expenditure, housing, fixedassets and durable goods, participation of households in poverty alleviation programs,and especially information on international remittances that households had receivedduring the 12 months before the interview.

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Expenditure and income per capita are collected using very detailed questionnaires inthe VHLSS. Expenditure includes food and non-food expenditure. Food expenditureincludes purchased food and foodstuff and self-produced products of households.Non-food expenditure comprises expenditure on education, healthcare houses,commodities, power, water supply and garbage. Household income includes incomefrom agricultural and non-agricultural production, labor earnings, pensions,scholarship, income from loan interest and house rental, remittances and socialtransfers. Income from agricultural production comprises crop income, livestockincome, aquaculture income, and income from other agriculture-related activities.

3. International migration and remittances in Vietnam3.1 Labor exportVietnam’s labor export is increasing during the past ten years (Figure 1). The numberof exported laborers increased from 31.5 thousand in 2000 to 87 thousand in 2008. Malelaborers account for around two-third of the exported laborers. Asian countries,especially Taiwan and Malaysia, are the main destination of the Vietnamese workers.

The left panel of Figure 2 shows the main employment of the overseas workers. Thedistribution of jobs is quite volatile. In 2001 relatively few migrants worked as

Figure 1.The number of Vietnam’s

exported workers

The number of export laborers Export laborers by destination countries

0

20,000

40,000

60,000

80,000

100,000

2000 2001 2002 2003 2004 2005 2006 2007 2008Years

Male Female Total

0%

20%

40%

60%

80%

100%

2000 2001 2002 2003 2004 2005 2006 2007 2008Years

Taiwan Japan South Korea Malaysia Others

Source: Authors’ preparation using data from Department of Overseas Labor of MOLISA

Figure 2.Vietnam’s labor export by

employment and wage

Employment

0%

20%

40%

60%

80%

100%

2001 2002 2003 2004 2005

Years

Manufacture Construction,textile and garmentWorking for households Sailors and fish catchOthers

Yearly wage

Source: Authors’ preparation using data from Department of Overseas Labor of MOLISA

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household labor, but in 2003 and 2004 it was the main job for export labor. In 2005, onthe other hand, a large proportion of export laborers worked in the construction, textileand garment industries.

Wages of export workers vary significantly across destination countries (Rightpanel of Figure 1). Japan and South Korea have the highest wages, at 7,850 and 7,492USD per year, respectively. Malaysia which is one of the main destinations of exportlabor has a yearly wage of only 1,800 USD.

3.2 International remittancesThis section presents the analysis of international remittances using VHLSSs. VHLSSs2002, 2004, 2006 and 2008 contain information on international remittances thathouseholds received.

As expected, according the 2008 VHLSS, HCM city receives the most remittances,even though according to MOLISA (2008), there are no export workers from HCM cityduring 2006-2008 and the city has no sampled households in the VHLSS sendinginternational migrants. HCM city has a large number of households with relatives whostay abroad permanently, while HCM city exports a negligible number of workers.Two-third of the total remittances to Vietnam are sent from the USA, where there aremore than two million Vietnamese living permanently (Quoc-Toan, 2009).

Since the number of households receiving international remittances in the VHLSSs ishigher, we examine the pattern of international remittances in more detail. The left panelof Figure 3 shown the percentage of households receiving remittances during the period1998-2008, which was rather stable during this period. However, the fraction of theurban households receiving remittances tends to decrease slightly in the recent years.

It is also interesting to note the drop in remittances in 2008, a year with a verysignificant spike in inflation. Whether the inflation spike caused the drop inremittances is not known. However, our results suggest that most remittances end upgoing to saving and housing investments. If interest rates and housing appreciationwere not keeping up with inflation, then transferring money from other currencies intoViet Nam Dong (VND) might have had a depressing effect on remittances.

The average remittances per receiving household at the current (nominal) priceincreased significantly overtime. When adjusted for price inflation, the average

Figure 3.Remittances in Vietnam

Percentage of households receiving remittances Remittances per receiving household

0

4

8

12

16

1998 2002 2004 2006 2008

Year

Per

cen

tag

e

Rural Urban Total

5,000

10,000

15,000

20,000

25,000

30,000

1998 2002 2004 2006 2008

Year

Th

ou

san

d V

ND

In current price In price of January 2006

Source: Authors’ estimation from VHLSSs

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remittances at the price of January 2006 grew at the lower pace. The average remittancesdecreased from 20,031 thousand VND in 2006 to 17,815 thousand VND in 2008.

The left panel of Figure 4 shows that average remittances per receiving householdsare much lower in the rural areas where poverty is concentrated than in the urbanareas. In addition, average remittances at the constant price decreased remarkably forthe rural households during the period 2006-2008. Average remittances received byurban households still increased slightly during the same period.

The ratio of remittances to household expenditures is very high, at around 45 percentin 2008. This ratio for the rural households is higher than for the urban households,which reflect the important role of remittances for the rural receiving households.

Tables I-III present the remittance pattern for different groups. Overall, theKinh/Chinese households are more likely to receive the remittances than the ethnicminority households. The non-poor tend to have more remittances than the poor.Finally, by regions, South East region has the highest fraction of theremittances-receiving households. HCM city is the city receiving largest remittancesamong cities and provinces in Vietnam.

It should be noted that analysis of international remittances for the poor andnon-poor in these Tables does not take into account the fact that poverty status ofhouseholds can be affected by remittances. Some poor households can receiveremittances, thereby becoming non-poor.

4. Impacts of international remittances4.1 Estimation methodTo measure impact of international remittances, we assume that the outcome ofinterest, e.g. household expenditure, has the functional form as follows:

Yi ¼ aþ Xibþ Digþ 1i; ð1Þ

where Yi is an outcome indicator of household i; Xi and 1i are observed and unobservedvariables of households and communities for household i, respectively; and D is theamount of remittances that households received. The marginal impact of transfers iscaptured by g. We do not use the double-log functions, since there are many

Figure 4.Remittances by urban and

rural households

5,000

10,000

15,000

20,000

25,000

30,000

1998 2002 2004 2006 2008

Year

Th

ou

san

d V

ND

Rural Urban

0

20

40

60

80

1998 2002 2004 2006 2008

Year

Per

cen

tag

e

Rural Urban Total

Remittances at the 2006 price per receivinghousehold

Fraction of remittances to household expenditures

Source: Authors’ estimation from VHLSSs

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households not receiving remittances, and taking logarithm of zero returns missingvalues.

In addition to the impact on household welfare indicators, we also the impact ofremittances on the consumption pattern of households. Following Adams (2005) andAdams and Cuecuecha (2010), we start with the Engel function:

Cij ¼ aj þ djEXPi þ hjðEXPiÞlogðEXPiÞ ð2Þ

where Cij is the expenditure on item j of household i. EXP is the total expenditure, andEXP ¼

PjCj. Then the share of expenditure on item j in the total expenditure is

expressed as follows:

Cij

EXPi

¼aj

EXPi

þ dj þ hjlogðEXPiÞ ð3Þ

To examine whether remittances can change the expenditure share, we add theremittance variable and control variables to equation (3):

Cij

EXPi

¼aj

EXPi

þ dj þ hjlogðEXPiÞ þ Xibj þ Digj þ 1ij ð4Þ

The marginal effect of remittances on the share of expenditure on item j is measured byparameter gj.

Groups/years 1998 2002 2004 2006 2008

Poor/non-poorNon-poor 7.48 7.08 8.33 7.73 6.94Poor 1.29 2.45 1.26 1.75 2.62EthnicityKinh/Hoa 6.13 6.25 7.79 7.42 6.92Ethnic minorities 0.80 2.86 1.46 2.95 2.46UrbanityRural 2.72 4.18 4.72 5.14 5.19Urban 14.16 11.25 13.79 11.62 9.62ProvincesHanoi 7.78 2.75 7.15 3.65 3.08HCM city 24.48 18.63 27.58 21.60 15.82Others 3.87 5.17 5.60 5.96 5.81RegionsRed River delta 3.89 3.66 5.69 4.29 5.38North East 1.00 2.88 2.14 3.93 4.00North West 0.00 6.68 1.87 2.63 2.14North Central Coast 4.38 4.58 5.79 6.14 7.10South Central Coast 5.62 6.56 6.05 7.69 5.27Central Highlands 2.33 3.25 3.54 3.42 2.70South East 16.43 13.57 16.59 13.46 11.39Mekong River Delta 4.04 5.96 7.20 8.33 6.65Total 5.47 5.89 7.12 6.92 6.43Number of observations 5,999 29,530 9,188 9,189 9,186

Source: Authors’ estimation from VHLSSs

Table I.Percentage of householdsreceiving remittances bydifferent groups duringthe period 1998-2008

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The main problem in estimating equation (1) is the endogeneity of remittances.Unobserved characteristics of remittances-receiving households can be different fromthose of households not receiving remittances. Failure to control for such unobservedfactors leads to biased estimates of the transfer impact. A standard method to deal withthe endogeneity problem is instrumental variable regressions. However, finding validinstrumental variables is very difficult. Using invalid instruments can result in largerbias in the impact estimates. Actually, we tried several instrument variables such as aproxy of the migration network and distance to railroad but the estimates were notconvincing.

In this paper, we use the panel nature of the data to avoid this endogeneity bias.A main assumption of the method used is that unobserved variables in the outcomeequation that are correlated with both outcome and transfers remained unchangedduring the period 2006-2008. Fixed-effect regression will be unable to remove allendogeneity bias if the unobserved variables which affect outcome and remittances arenot time-invariant. It is possible that households can ask their overseas relatives andfriends send more money back when facing negative shocks or business opportunities.These risks are unobserved, time variants and can be correlated with both remittancesand outcome. The 2008 VHLSS contains some information on negative risks andshocks faced by households, and we can test whether shocks can affect remittancesreceived by households by running regressions of remittances on shocks and control

Groups/years 1998 2002 2004 2006 2008

Poor/non-poorNon-poor 16,041.5 18,594.9 19,223.8 20,554.0 18,463.5Poor 3,101.7 2,392.8 5,720.9 5,358.4 5,130.4EthnicityKinh/Hoa 15,237.3 17,412.1 18,948.3 20,638.9 18,317.3Ethnic minorities 4,990.2 6,882.1 12,793.6 7,985.3 6,515.9UrbanityRural 10,964.2 14,753.3 16,713.0 18,593.2 14,120.2Urban 17,532.0 19,351.6 20,812.4 21,707.4 22,946.0ProvincesHanoi 22,799.1 8,347.5 9,970.8 8,138.6 13,472.5HCM city 18,127.2 28,254.5 24,794.7 22,769.2 24,617.6Others 12,880.1 14,326.2 17,106.9 19,602.6 16,399.1RegionsRed River Delta 13,622.4 8,878.7 16,579.6 30,532.4 21,663.3North East 7,880.3 14,934.9 17,070.6 17,042.7 16,274.3North West – 6,942.5 12,276.2 7,611.3 4,329.2North Central Coast 11,832.7 16,511.3 16,985.4 21,472.9 10,225.0South Central Coast 13,239.5 8,652.9 15,731.0 12,795.2 6,768.6Central Highlands 4,355.6 8,761.0 10,132.3 14,610.9 7,023.6South East 16,686.6 23,248.7 22,564.1 21,169.6 23,896.1Mekong River Delta 17,434.3 19,350.6 17,887.4 16,236.5 16,732.6Total 15,052.0 16,878.9 18,815.9 20,031.0 17,815.4Number of observations 5,999 29,530 9,188 9,189 9,186

Source: Authors’ estimation from VHLSSs

Table II.Average remittances perreceiving households at

the January 2006 price bydifferent groups during

the period 1998-2008(thousand VND)

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variables. The regressions show that natural, social and economic shocks are notsignificantly correlated with international remittances[2]. Thus, we expect thatestimation bias resulting from time-variant factors is small relative to the biaseliminated by using fixed-effects regressions. In addition, as mentioned in previoussections, international remittances to Vietnam are mainly sent to permanent migrantswho are not members of remittances-receiving households.

4.2 Estimation resultsIn this paper, we examine the effect of remittances on household expenditures includingnon-production and production expenditure. Tables AI and AII in the Appendixpresents the fixed-effects regressions of non-production expenditures. Estimates ofinternational remittances from regressions in which international remittances arestatistically significant are presented in Table IV. They show that an increase of oneVND in international remittances lead to an increase of 0.87 VND in household spending.Most of international remittances are used for housing, saving and lending. A smallproportion of remittances are spent for durable goods. The effect of internationalremittances on consumptions for living is very small and not statistically significant,implying that international remittances do not have a significant effect on povertyreduction for receiving households (poverty is measured based on living consumptionexpenditure). Most of the receiving households are the non-poor and they tend to spend

Groups/years 1998 2002 2004 2006 2008

Poor/non-poorNon-poor 4.98 50.04 43.00 52.89 45.39Poor 0.39 23.66 47.18 62.87 52.65EthnicityKinh/Hoa 38.65 49.36 43.16 53.21 45.80Ethnic minorities 46.42 42.47 36.02 43.98 33.13UrbanityRural 51.88 69.18 62.04 73.71 55.16Urban 34.91 38.98 34.60 39.61 38.53ProvincesHanoi 42.90 14.72 12.94 14.03 21.29HCM city 30.54 45.31 35.45 32.80 30.25Others 45.81 52.96 52.70 65.30 54.23RegionsRed River Delta 44.33 36.54 45.44 101.58 66.44North East 40.95 63.19 82.51 78.36 76.84North West 46.29 68.20 33.54 21.45North Central Coast 57.78 77.62 69.04 103.21 52.23South Central Coast 36.99 26.65 44.77 35.02 18.17Central Highlands 33.65 30.53 29.36 54.49 29.60South East 31.90 46.70 35.98 35.20 35.75Mekong River Delta 52.50 63.85 48.89 47.26 50.49Total 38.69 49.20 43.03 52.98 45.49Number of observations 5,999 29,530 9,188 9,189 9,186

Source: Authors’ estimation from VHLSSs

Table III.Ratio of remittances toexpenditure (%) forreceiving households bydifferent groups duringthe period 1998-2008

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the received remittances on housing and land instead of food and other necessarynon-food items.

We also try interactions between remittances and an urban variable as well asinteractions between remittances and a dummy variable of Hanoi and HCM city. Itshows that the effect of remittances on spending food and durable is lower for theurban households than for the rural households. In Hanoi and HCM city, the effect ofremittances on spending on house and lands is also lower. Interaction variables inregressions of other expenditure items are not statistically significant.

The regressions of the expenditure share on different good items are presented inTables AIII and AIV in Appendix. The point estimates are small. Remittances arestatistically significant in regressions of the expenditure share on fixed assets andhouse and land. Remittances reduce the share of expenditure on fixed-effects andincrease the share of expenditures on land and housing.

Table AV in the Appendix presents regressions of spending on production. The effectsof remittances on production expenditures are negligible and not statistically significant.So remittances are mainly used for consumption rather than production and business.

5. ConclusionsInternational migration is increasing rapidly in Vietnam, and is seen by the governmentas an important development tool (Nguyen and Mont, 2010). However, quantitativeanalysis of the impact of migration on the lives of migrants and their families in Vietnamhas been limited. Most available empirical studies focus on the determinants of

Dependent variable (thousand VND)

Explanatory variablesTotal

spendingSpending on

foodSaving and

lendingSpending on

durables

Payment forhouse and

lands

Model without interactionInternational remittances(thousand VND)

0.873 * * * 20.024 * 0.163 * * * 0.064 * * * 0.636 * * *

(0.132) (0.014) (0.055) (0.023) (0.132)Model without interaction between remittances and urbanityInternational remittances(thousand VND)

0.699 20.111 * * * 0.225 0.199 * * * 0.725 *

(0.480) (0.041) (0.171) (0.044) (0.419)International remittances(thousand VND) * Urban(yes ¼ 1)

0.122 0.061 * * * 20.049 20.095 * * * 20.062

(0.265) (0.023) (0.110) (0.029) (0.229)Model without interaction between remittances and largest citiesInternational remittances(thousand VND)

0.963 * * * 20.019 * 0.201 * * * 0.071 * * * 0.686 * * *

(0.104) (0.010) (0.065) (0.023) (0.138)International remittances(thousand VND) * City(Hanoi and HCMcity ¼ 1)

20.575 20.032 20.294 20.047 20.314 *

(0.476) (0.075) (0.075) (0.051) (0.184)Observations 8,176 8,176 8,176 8,176 8,176Number of sampledhouseholds

4,088 4,088 4,088 4,088 4,088

Note: Significant at: *10, * *5, * * *1 percent

Table IV.Regression of household

outcomes

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migration and the impact of remittances on consumption and poverty. This paperattempts to partially fill that gap by examining the use of international remittances byVietnamese families.

Most international remittances go to non-poor families, so the impact of migrationon poverty alleviation is limited, although a recent program promoting internationalmigration in poor areas might begin changing that (Nguyen and Mont, 2010).Presently, though, remittances disproportionately go to non-poor, ethnic majoritypopulations living in urban areas, particularly Ho Chi Minh City.

Similar to findings in other countries, most of the households receiving internationalremittances are more likely to invest them, rather than put them towards consumption.However, unlike some countries such as Guatemala and Mexico where internationalremittances are used for productive assets, education and health (Taylor and Mora,2006; Adams, 2005), most international remittances in Vietnam are used to purchaseland and housing. This is reasonable, since most receiving households in Vietnam arebetter-off and non-agricultural.

If most international migration experiences are temporary, the finding on the positiveeffect of international remittances on housing spending in Vietnam makes sense. A shortspike in income is not likely to be consumed all at once, but rather be leveraged intosecuring a more stable financial situation. By investing in items like housing, thisinvestment is also more able to be shared with other family members and acrossgenerations. This coincides with many motives for migration – increasing income,altruism (giving to families), and securing a wealth base to insure against possible futureincome shocks. However, while short-term international migration is growing inVietnam, the bulk of the remittances are still coming from permanent migrants, fromwho the stream of remittances is more likely to be seen as part of permanent income. Sowe might expect more of those remittances to be financing consumption – except for thefact that families receiving these remittances from these sources are generally thought tobe the best off financially, so consumption needs are not as important.

In fact, in a previous study of international remittances, it was found that they did leadto increased consumption. Using VHLSSs in 2002 and 2004, Nguyen (2008) found apositive effect of international remittances on consumption and poverty reduction. Thefact that remittances are longer used this way, could have to do with the significant growthrates in household income in Vietnam and new opportunities for saving and investment.

It should be noted that our estimates show the effect of international remittances forall of the receiving households. For some specific groups such as poor and farmhouseholds, the effect of international remittances on consumption and povertyreduction could be higher. The effect of international remittances can also differ fordifferent types of migrants including permanent and temporary. Estimation ofdisaggregated impacts of international remittances sent by permanent and temporarymigration for different groups requires data from larger surveys. Thus, it is beyond thescope of the paper, but certainly important for future research.

The findings from this paper suggest that current international remittances are notan effective measure for poverty reduction in the short-run. To increase the effect ofremittances on poverty, remittances should be received by poor households. Currently,the government has launched programs to support the poor in sending internationalmigrants so this may begin to change somewhat. Also, policies which allow Vietnamese

IJDI11,2

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in foreign countries to buy property in Vietnam could be an effective measure to attractmore international remittances.

Notes

1. The sample selection of VHLSSs follows a method of stratified random cluster sampling.GSO selected households in all rural and urban provinces of Vietnam. The number ofprovinces is 64 in 2006-2008, so the number of strata were. Among each stratum, communeswere selected randomly as primary sampling unit. The number of communes per stratum isproportionate to the population proportion of the strata over the total population. Thenumber of selected communes in each VHLSS is around 3,000. In each commune, aroundthree households were selected randomly.

2. We do not present these regressions in this paper. The regression results can be provided onrequest.

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Acosta, P. (2006), “Labor supply, school attendance, and remittances from internationalmigration: the case of El Salvador”, Policy Research Working Paper No. 3903, The WorldBank, Geneva.

Adams, R.H. Jr (1989), “Workers’ remittances and inequality”, Development and Cultural Change,Vol. 38 No. 1, pp. 45-71.

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Dang, N.A., Goldstein, S. and Mc Nally, J. (1997), “Internal migration and development inVietnam”, International Migration Review, Vol. 31 No. 2, pp. 312-37.

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Corresponding authorNguyen Viet Cuong can be contacted at: [email protected]

To purchase reprints of this article please e-mail: [email protected] visit our web site for further details: www.emeraldinsight.com/reprints

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Appendix

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Table AI.Fixed-effects regressions

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Householdwelfare in

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(56.

811)

(584

.637

)(3

43.8

69)

(1,1

39.8

33)

(32.

584)

Con

stan

t2

988.

883

1,33

5.92

25.

828

21,

345.

092

1,70

6.94

1,25

2.83

566.

925

**

*

(3,1

22.5

21)

(1,0

61.1

07)

(117

.882

)(1

,236

.763

)(1

,775

.306

)(3

,761

.438

)(1

23.8

33)

Ob

serv

atio

ns

8,17

68,

176

8,17

68,

176

8,17

68,

176

8,17

6N

um

ber

ofi

4,08

84,

088

4,08

84,

088

4,08

84,

088

4,08

8R

20.

050.

010.

010.

010.

020.

030.

02

Notes:

Sig

nifi

can

tat

:* 1

0,*

* 5an

d*

** 1

per

cen

t;st

and

ard

erro

rsin

bra

cket

s

Table AII.Fixed-effects regressionsof non-productionexpenditures

IJDI11,2

160

Ex

pla

nat

ory

var

iab

les

Ed

uca

tion

alex

pen

dit

ure

Hea

lth

exp

end

itu

reS

pen

din

gon

food

Sp

end

ing

onn

onfo

odS

pen

din

gon

con

trib

uti

ons

and

tran

sfer

sS

avin

gan

dle

nd

ing

Inte

rnat

ion

alre

mit

tan

ces

(mil

lion

VN

D)

0.00

22

0.01

22

0.00

62

0.00

92

0.01

70.

011

(0.0

06)

(0.0

13)

(0.0

25)

(0.0

12)

(0.0

26)

(0.0

27)

1/h

ouse

hol

dex

pen

dit

ure

214

,848

.184

**

*2

19,0

89.5

67*

*7,

823.

902

23,5

11.8

87*

**

222

,618

.664

**

*19

,321

.493

*

(2,5

74.4

25)

(9,6

99.2

20)

(12,

142.

986)

(4,8

52.9

96)

(6,9

29.9

99)

(10,

900.

509)

Log

arit

hm

ofh

ouse

hol

dex

pen

dit

ure

22.

355

**

*2

0.48

92

21.0

90*

**

27.

986

**

*2

0.90

5*

7.29

6*

**

(0.1

90)

(0.4

20)

(0.6

72)

(0.2

73)

(0.5

02)

(0.8

56)

Rat

ioof

mem

ber

sy

oun

ger

than

16to

tota

lh

ouse

hol

dm

emb

ers

20.

759

1.47

42

2.29

52

1.78

60.

077

3.03

1(0

.755

)(1

.149

)(1

.880

)(1

.315

)(1

.695

)(2

.946

)R

atio

ofm

emb

ers

old

erth

an60

toto

tal

hou

seh

old

mem

ber

s2

1.92

2*

*5.

090

**

*2

1.51

22.

526

**

23.

342

0.06

(0.8

03)

(1.8

28)

(2.0

75)

(1.1

90)

(2.3

68)

(1.8

98)

Hou

seh

old

size

0.75

2*

**

0.29

13.

264

**

*1.

412

**

*2

1.42

8*

**

21.

233

**

*

(0.1

08)

(0.1

85)

(0.2

51)

(0.1

66)

(0.2

39)

(0.2

92)

Hea

dw

ith

tech

nic

ald

egre

e2

2.16

1*

**

1.31

30.

349

1.97

5*

20.

428

22.

11(0

.777

)(1

.429

)(1

.688

)(1

.145

)(1

.665

)(2

.416

)H

ead

wit

hp

ost-

seco

nd

ary

sch

ool

24.

833

**

*2

2.24

96.

935

**

*5.

448

**

*2

1.49

60.

9(1

.690

)(2

.039

)(2

.637

)(2

.083

)(2

.315

)(3

.183

)A

rea

ofan

nu

alcr

opla

nd

per

cap

ita

(1,0

00m

2)

0.00

80.

001

0.08

7*

**

0.04

6*

**

0.00

30.

012

(0.0

10)

(0.0

14)

(0.0

30)

(0.0

13)

(0.0

23)

(0.0

48)

Are

aof

per

enn

ial

crop

lan

dp

erca

pit

a(1

,000

m2)

0.00

62

0.01

90.

091

**

*2

0.00

50.

044

0.17

4*

*

(0.0

14)

(0.0

22)

(0.0

35)

(0.0

19)

(0.0

28)

(0.0

83)

For

estr

yla

nd

per

cap

ita

(1,0

00m

2)

20.

004

20.

002

0.02

80.

001

20.

003

0.00

1(0

.005

)(0

.003

)(0

.020

)(0

.013

)(0

.015

)(0

.020

)A

qu

acu

ltu

rew

ater

surf

ace

per

cap

ita

(1,0

00m

2)

20.

016

0.01

32

0.03

52

0.03

70.

046

20.

027

(0.0

17)

(0.0

46)

(0.1

07)

(0.0

45)

(0.0

57)

(0.1

31)

Du

mm

yy

ear

2008

0.08

12

0.15

58.

881

**

*1.

803

**

*0.

325

22.

412

**

*

(0.1

07)

(0.1

93)

(0.3

60)

(0.2

06)

(0.2

94)

(0.3

73)

Con

stan

t26

.479

**

*8.

649

*24

1.66

8*

**

92.9

47*

**

24.1

29*

**

264

.129

**

*

(2.0

98)

(4.8

88)

(7.1

25)

(2.9

42)

(5.2

54)

(9.1

08)

Ob

serv

atio

ns

8,17

68,

176

8,17

68,

176

8,17

68,

176

Nu

mb

erof

i4,

088

4,08

84,

088

4,08

84,

088

4,08

8R

20.

070.

010.

520.

260.

020.

07

Table AIII.Fixed-effects regressions

of the share ofnon-production

expenditures

Householdwelfare in

Vietnam

161

Ex

pla

nat

ory

var

iab

les

Deb

tre

pay

men

tS

pen

din

gon

rep

airi

ng

fix

edas

sets

Sp

end

ing

onb

uy

ing

fix

edas

sets

Sp

end

ing

ond

ura

ble

sP

aym

ent

for

hou

sean

dla

nd

sE

xp

end

itu

reon

elec

tric

ity

,w

ater

,g

arb

age

Inte

rnat

ion

alre

mit

tan

ces

(mil

lion

VN

D)

0.00

003

20.

004

20.

030

**

20.

024

0.08

3*

**

0.00

2(0

.000

25)

(0.0

08)

(0.0

12)

(0.0

18)

(0.0

26)

(0.0

07)

1/h

ouse

hol

dex

pen

dit

ure

213

7.44

2*

165.

708

19,4

53.3

05*

**

222

,223

.37

**

*73

,152

.424

**

*2

3,84

6.62

(75.

314)

(1,1

65.2

68)

(6,7

27.8

94)

(6,5

40.5

65)

(12,

508.

457)

(2,7

17.1

02)

Log

arit

hm

ofh

ouse

hol

dex

pen

dit

ure

0.02

0*

**

0.16

83.

558

**

*1.

551

**

*19

.915

**

*2

1.69

6*

**

(0.0

05)

(0.1

17)

(0.6

54)

(0.4

94)

(1.0

61)

(0.1

45)

Rat

ioof

mem

ber

sy

oun

ger

than

16to

tota

lh

ouse

hol

dm

emb

ers

0.01

0.06

32

0.28

52

1.18

41.

686

21.

158

*

(0.0

17)

(0.4

61)

(1.4

78)

(1.8

04)

(2.7

54)

(0.6

49)

Rat

ioof

mem

ber

sol

der

than

60to

tota

lh

ouse

hol

dm

emb

ers

20.

002

20.

006

20.

053

22.

036

6.60

7*

**

20.

064

(0.0

19)

(0.2

67)

(0.7

37)

(1.4

42)

(2.2

52)

(0.5

15)

Hou

seh

old

size

20.

005

**

0.02

22

0.16

42

0.30

52

2.14

4*

**

0.06

2(0

.002

)(0

.046

)(0

.138

)(0

.232

)(0

.288

)(0

.068

)H

ead

wit

hte

chn

ical

deg

ree

0.04

8*

**

20.

199

20.

984

1.48

32

3.96

3*

20.

057

(0.0

16)

(0.1

52)

(0.9

79)

(1.3

88)

(2.1

91)

(0.4

38)

Hea

dw

ith

pos

t-se

con

dar

ysc

hoo

l2

0.03

82

0.14

32

1.07

74.

977

23.

447

21.

172

(0.0

24)

(0.2

88)

(1.3

52)

(3.1

93)

(3.6

98)

(1.6

41)

Are

aof

ann

ual

crop

lan

dp

erca

pit

a(1

,000

m2)

0.00

00.

010.

028

20.

046

*2

0.13

0*

0.00

5(0

.001

)(0

.006

)(0

.050

)(0

.026

)(0

.074

)(0

.008

)A

rea

ofp

eren

nia

lcr

opla

nd

per

cap

ita

(1,0

00m

2)

0.00

02

0.00

52

0.01

32

0.03

32

0.25

0*

*0.

003

(0.0

00)

(0.0

04)

(0.0

33)

(0.0

26)

(0.1

07)

(0.0

06)

For

estr

yla

nd

per

cap

ita

(1,0

00m

2)

0.00

00.

001

20.

003

20.

038

*0.

006

0.00

2(0

.000

)(0

.001

)(0

.011

)(0

.019

)(0

.015

)(0

.002

)A

qu

acu

ltu

rew

ater

surf

ace

per

cap

ita

(1,0

00m

2)

20.

002

*2

0.00

20.

019

20.

023

0.21

40.

014

(0.0

01)

(0.0

16)

(0.0

32)

(0.0

33)

(0.1

37)

(0.0

09)

Du

mm

yy

ear

2008

20.

003

20.

121

*2

1.31

3*

**

21.

099

**

*2

5.80

5*

**

0.11

1*

(0.0

02)

(0.0

65)

(0.2

16)

(0.2

82)

(0.3

85)

(0.0

63)

Con

stan

t2

0.14

6*

**

21.

558

234

.242

**

*2

7.68

62

192.

085

**

*20

.323

**

*

(0.0

53)

(1.2

44)

(6.8

74)

(5.3

82)

(11.

177)

(1.6

70)

Ob

serv

atio

ns

8,17

68,

176

8,17

68,

176

8,17

68,

176

Nu

mb

erof

i4,

088

4,08

84,

088

4,08

84,

088

4,08

8R

20.

030.

010.

040.

020.

310.

11

Notes:

Sig

nifi

can

tat

:* 1

0,*

* 5an

d*

** 1

per

cen

t;st

and

ard

erro

rsin

par

enth

esis

Table AIV.Fixed-effects regressionsof the share ofnon-productionexpenditures

IJDI11,2

162

Ex

pla

nat

ory

var

iab

les

Tot

alp

rod

uct

ion

and

bu

sin

ess

cost

Cro

pp

rod

uct

ion

Liv

esto

ckco

st

Hu

nti

ng

and

trap

pin

gan

imal

sA

gri

cult

ura

lse

rvic

eco

stF

ores

try

pro

du

ctio

nA

qu

acu

ltu

rep

rod

uct

ion

Non

-ag

ricu

ltu

ral

pro

du

ctio

n

Inte

rnat

ion

alre

mit

tan

ces

(th

ousa

nd

VN

D)

20.

111

20.

007

20.

004

0.00

00.

000

0.00

02

0.00

22

0.09

9(0

.147

)(0

.008

)(0

.019

)(0

.001

)(0

.001

)(0

.000

)(0

.010

)(0

.144

)R

atio

ofm

emb

ers

you

ng

erth

an16

toto

tal

hou

seh

old

mem

ber

s

47,6

39.4

42

2,50

0.34

279

5.27

62

323.

204

465.

976

287

.055

7,40

1.44

9*

43,4

77.8

9

(31,

653.

350)

(3,2

60.5

08)

(1,5

61.1

78)

(207

.753

)(4

96.6

78)

(87.

975)

(4,1

13.1

69)

(31,

134.

338)

Rat

ioof

mem

ber

sol

der

than

60to

tota

lh

ouse

hol

dm

emb

ers

249

,304

.76

238

8.52

72

793.

422

63.9

742

266.

733

254

.348

**

4,70

9.39

4*

*2

52,5

75.1

0

(43,

195.

808)

(1,4

62.6

10)

(900

.736

)(1

45.4

77)

(571

.060

)(2

7.65

6)(2

,081

.385

)(4

3,15

4.75

2)H

ouse

hol

dsi

ze2

1,99

3.86

222

.48

290.

709

*43

.142

47.7

672

1.53

527

7.58

22

2,62

9.05

(3,1

54.5

37)

(263

.523

)(1

55.5

76)

(26.

364)

(148

.040

)(6

.830

)(3

69.7

31)

(3,1

19.6

45)

Hea

dw

ith

tech

nic

ald

egre

e19

,355

.623

**

744.

752

532.

061

71.9

5873

.52

211

.591

2,89

4.43

3*

15,0

50.4

90*

(8,2

41.5

70)

(1,0

08.0

00)

(856

.176

)(7

6.25

3)(2

55.4

35)

(25.

563)

(1,6

67.9

24)

(7,9

48.9

27)

Hea

dw

ith

pos

t-se

con

dar

ysc

hoo

l2

34,5

15.2

32

1,50

3.65

21,

069.

212

4.20

32

98.2

882

48.3

15*

26,

082.

102

25,7

09.4

7(2

7,30

0.64

4)(1

,585

.285

)(1

,772

.808

)(9

2.18

9)(1

65.0

11)

(27.

840)

(5,4

02.4

27)

(26,

860.

484)

Are

aof

ann

ual

crop

lan

dp

erca

pit

a1.

537

**

*1.

605

**

*2

0.03

32

0.01

60.

074

20.

002

20.

062

0.03

(0.4

42)

(0.4

59)

(0.0

24)

(0.0

33)

(0.1

07)

(0.0

02)

(0.0

93)

(0.0

73)

Are

aof

per

enn

ial

crop

lan

dp

erca

pit

a0.

159

0.28

8*

0.02

42

0.00

22

0.00

22

0.00

22

0.10

22

0.04

5(0

.180

)(0

.155

)(0

.033

)(0

.004

)(0

.006

)(0

.002

)(0

.124

)(0

.056

)F

ores

try

lan

dp

erca

pit

a2

0.03

40.

002

0.00

20.

002

0.00

02

0.00

42

0.00

12

0.03

6*

(0.0

27)

(0.0

22)

(0.0

07)

(0.0

02)

(0.0

01)

(0.0

05)

(0.0

03)

(0.0

19)

Aq

uac

ult

ure

wat

ersu

rfac

ep

erca

pit

a1.

419

0.09

10.

137

20.

002

0.01

40.

000

1.47

5*

20.

296

(0.8

72)

(0.1

17)

(0.1

08)

(0.0

04)

(0.0

15)

(0.0

00)

(0.8

32)

(0.2

78)

Du

mm

yy

ear

2008

17,3

73.6

**

*2,

135.

57*

**

1,23

7.5

**

*2

141.

883

**

*26

5.64

4*

**

28.4

71*

*2

817.

3614

,665

.6*

**

(4,7

92.7

50)

(264

.519

)(2

29.4

89)

(27.

744)

(67.

705)

(11.

174)

(627

.372

)(4

,759

.697

)C

onst

ant

19,9

42.9

82

276.

736

2,36

0.81

9*

**

65.5

912

500.

036

81.5

27*

**

242

4.75

318

,636

.57

(12,

471.

079)

(1,5

25.5

79)

(810

.407

)(1

24.7

44)

(614

.988

)(3

0.26

8)(2

,176

.857

)(1

2,20

1.39

8)O

bse

rvat

ion

s8,

176

8,17

68,

176

8,17

68,

176

8,17

68,

176

8,17

6N

um

ber

ofi

4,08

84,

088

4,08

84,

088

4,08

84,

088

4,08

84,

088

R2

0.01

00.

220

0.01

00.

010

0.02

00.

000

0.01

00.

000

Notes:

Sig

nifi

can

tat

:* 1

0,*

* 5an

d*

** 1

per

cen

t;st

and

ard

erro

rsin

bra

cket

s

Table AV.Fixed-effects

regressions ofproduction

expenditures

Householdwelfare in

Vietnam

163