Determinants of rural-urban inequality in Vietnam: Detailed decomposition analyses based on unconditional quantile regressions.

Abstract

This study examines determinants of the rural-urban gap of household expenditure in Vietnam using national household data in 2008-2012. We have used unconditional quantile regressions (UQR) (Firpo, et al. 2009) to carry out quantile decomposition analyses to identify underlying causes for the rural-urban disparity across the entire distribution. Our analyses have overcome the limitations of Oaxaca-Blinder decomposition, namely, (i) decomposition is made only at mean and (ii) a dependent variable has a linear and parametric relationship with covariates. To do these, we have carried out detailed decomposition analyses based on Melly (2005) and the UQR decomposition (Fortin et al, 2011) combined with the reweighting technique. Our results show that basic education is beneficial to the rural poor and ethnic minorities in improving their living standards. Basic education also reduces within- as well as between-inequality, while higher education has opposite effects. Remittances generally improve rural welfare, but do not reduce within- or between-inequality. It has been suggested that public policy should ensure easier access to education for the rural poor, support the self-employed to raise and stabilise their income, and make it easier for rural agricultural households to diversify their activities into the non-farm sector.