Rural non-farm employment under trade reform: evidence from Vietnam, 1993-2002

The role of the rural non-farm sector (RNFS) on poverty reduction in Vietnam

by THAI-HUNG PHAM. PRUS WORKING PAPER NO.35, University of Sussex

Abstract

Vietnam's rural economy has substantially diversified over the past two decades. The rural nonfarm sector has grown rapidly and became an important source of employment and income for rural households. This growing nonfarm employment was associated with radical changes in the trade policy reform that has put the country to the top two or three performers in the developing world. This paper examines the potential effect of the trade policy reform on nonfarm employment in rural Vietnam during the period 1993-2002. It proposes two trade openness indices that allow changes in the trade policy at the macro level to be transmitted to rural households. The results reveal that the trade policy reform does have a material impact on rural nonfarm employment.

While a more liberalized agricultural sector encourages nonfarm diversification, a lower protection level in the nonfarm sector discourages individual participation in nonfarm incomegenerating activities.

Full paper available for download at http://www.sussex.ac.uk/Units/PRU/wps/wp35.pdf