Diversification, risk management and risk coping strategies: Evidence from rural households in three provinces in Vietnam

Abstract

The paper analyzes the relationship between the allocation of labor and land, the number of crops grown and income sources of rural households in Vietnam and different types of shocks and risks. It uses the data from the first phase of the household survey in three provinces of Central of Vietnam, conducted within the scope of the DFG research project "Impact of shocks on the vulnerability to poverty: consequences for development of emerging Southeast Asian economies". The results suggest that the households diversify their portfolio (labor and land) into different income generating activities in order to cope with shocks. Among the different types of shocks and risks, agriculture and economic shocks and risks are the main factors to explain the (ex-post) risk-coping strategies and the (ex-ante) risk management of the households. The number of crops grown and the number of income sources from the households experienced with shocks are higher than others. In addition, the high-risk expectation households diversify their labor and land more than the low risk expectation households. The access to credit and market, the number of household labor, the education of the household head, and the wealth of the household are also very important factors that impact on the diversification level of the households