ECONOMIC GROWTH AND POVERTY REDUCTION IN VIETNAM: AN EMPIRICAL ANALYSIS OF THE GROWTH–POVERTY NEXUS (1992–2018)
Ishaq Saad Idris
Volume 14 Issue 1
Abstract
This study examines the extent to which economic growth contributes to poverty reduction, using Vietnam as a case study. The relationship between economic growth and poverty reduction has remained a major issue in development economics, with many scholars arguing that sustained growth improves living standards, creates employment opportunities, and raises household incomes, thereby reducing poverty. However, some studies suggest that growth does not automatically benefit the poor, particularly where income inequality and unequal distribution of opportunities persist. Against this background, the study investigates whether Vietnam’s economic growth has significantly reduced poverty over the period 1992 to 2018. The present paper investigates how much economic growth contributes to poverty alleviation, on the basis of Vietnam's case. The link between economic growth and poverty alleviation is a central issue in development economics, and a large number of studies have shown that sustained economic growth contributes to an increase of living standards, of employment and of household incomes, which in turn results in poverty alleviation. Others studies indicate, however, that growth is not necessarily good for the poor, especially when income inequality and inequitable distribution of opportunities remain. In this context, the study seeks to answer the question of whether Vietnam's economic growth has had a significant impact on alleviating poverty from 1992 to 2018. The data used in the study comes from secondary sources from World Bank's World Development Indicators. The economic growth is proxied by Real Gross Domestic Product (RGDP) and poverty is proxied by poverty headcount ratio. The poverty data was not available for certain years; these were filled in by means of linear interpolation. Analysis is done using graphical trend analysis, Pearson correlation and Ordinary Least Squares (OLS) regression to analyse the relationship between the variables. The results show that there is a significant and negative correlation between growth and poverty in Vietnam. The graphical analysis reveals that the level of poverty has decreased significantly during the study period as GDP steadily increased. The result of the correlation shows that there is a very high level of negative association between economic growth and poverty (at about -0.93). Likewise, the regression result reveals that the economic growth is negative and significantly affecting the reduction of poverty. In particular, a 1% growth of RGDP would lead to a reduction in poverty of approximately 1.71%. Economic growth is therefore a very important determinant in Vietnam's poverty reduction, the study finds. With this in mind, it suggests developing countries define their growth policies as inclusive and sustained to create more jobs, increase incomes, and ensure that the fruits of growth reach poorer households. Keywords: Economic Growth, Poverty Reduction; Poverty Headcount Ratio; Growth-Poverty Nexus
Download Paper