Agricultural Investment and Structural Change: Evidence from Rural Vietnam

Institute for Environmental Economics & World Trade
Trung Thanh Nguyen, Truong Lam Do, Ulrike Grote
Agricultural Investment and Structural Change:
Evidence from Rural Vietnam
ReSAKSS – Asia Conference
Bangkok, 12-14.12.2017

2
Outline
ReSAKSS – Asia Conference, Bangkok, 12-14.12.2017
 Introduction
 Research Questions
 Data & Methods
 Main Findings
 Summary & Implications

3
Introduction
 Structural change as part of economic growth & key role of
agriculture (Lewis, 1955, Johnston & Mellor, 1961)
 Patterns of structural change
 Most studies use country level macro data (Gollin et al., 2005;
Michaels et al., 2012)
 An improved understanding at the household level needed!

4
 Rapid economic growth & structural change
 Annual GDP growth 7.2% from 2002-2012 (Berliner et al., 2013)
 Agricultural GDP & poverty decline, income inequality increases
(World Bank, 2015)
 Livestock production has been developing
 By 8 mill. HHs, contribute 27% to agricultural GDP & 4% to GDP
(Stanton et al., 2011)
 Expected 42% to agricultural GDP by 2020 & 5% annual growth
(Do et al., 2017)
Introduction: Vietnam

5
Research objectives
 To investigate the relationship between agricultural investment
& structural change at the farm level in Central Vietnam
 To examine the impact, e.g. livestock production, on poverty &
income equality

6
Key indicators
 Agricultural investment: agricultural investment/ha during
the last three years
 Structural change: farm labour share, farmland size
 Poverty: Foster, Greer, and Thorbecke poverty indices
(headcount, gap, & severity)
 Income equality: Lorenz curves & Gini coefficients

7
Data
 TVSEP project
 3 provinces
 About 2200 households
 Five waves (2007, 2008,
2010, 2013, 2016)

8
Method(1): Econometric regression
Asset
(t-2)
Ag. investment
(t-2)
Farm yield
(t-1)
Farm labor (t)
Machinery
expenditure (t)
Farmland size
(t)
 We also control for other household & farm characteristics,
village conditions, income shocks, & annual rainfall

9
Method(2): Combined PSM with DID (M-DID)
 We combine with-without with before-after

10
Result(1): Changes in farm size & no. of farms
Year Farmland size (ha) No. of farm
2007 0.87 2181
2008 0.90 2141
2010 0.95 2097
2013 0.98 1998
2016 1.07 1830
Source: based on TVSEP data of the 3 provinces, total no. of 2200

11
Result(2): Other changes
66.6%
55.1%55.4%
40.9%
46.5%
41.8%
16.6%
39.2%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
2007 2008 2010 2013 2016 Year
Farm labor share Farm investment share
Farm income share Livestock income share

12
Result(3): Determinants of structural change
 Positive effect of agricultural investment on crop yield
 A higher crop yield leads to a lower farm labour share, but a
higher machinery expenditure & a larger farmland size
 That is similar with education level of the heads, irrigation, &
non-farm employment
 Income shocks reduces agricultural investment & crop yield
 Livestock increases agricultural investment & crop yield

13
Poverty index
Having livestock (1) Giving up livestock (2)
Whole sub-
sample
Shock
households
Whole sub-
sample
Shock
households
Head count (P0) -0.037 -0.013 0.200*** 0.173***
Poverty gap (P1) -0.049** -0.064** 0.153*** 0.167***
Poverty severity (P2) -0.040** -0.057** 0.134** 0.167**
(1): Consumption poverty line at 1.25 $PPP, (2): Income poverty line at 2 $PPP, *, **, *** significant at 10%, 5%, and 1%,
respectively, Radius matching with common support and band width 0.06.
Result(4): Impact livestock on poverty reduction
 Positive effect of having livestock on poverty reduction
 Negative effect of giving up livestock on poverty reduction
 These are more important for households with income shocks

14
0
102030405060708090
100
Cumulativeincomeshare
0 10 20 30 40 50 60 70 80 90 100
Cumulative population share
HH income with livestock income HH income without livestock income
HH income with positive livestock income Equality
Result(5): Impact livestock on income inequality
 Livestock diseases lead to negative livestock income & insignificant
effect on income inequality reduction
 Positive livestock income reduces income inequality by 4%

15
Summary
 Clear sign of structural change at the farm level
 Effects of agricultural investment on crop yield, farm labour
share, & farmland size
 Larger farmers with livestock invest more in farming
 Shocks impact on agricultural investment, crop yield & constraint
structural change
 Livestock contribute to reducing poverty & income inequality, but
 Livestock diseases reduce this positive effect

16
Implications
 Promotion of agricultural investment through
livestock rearing & farm land accumulation
 Development of rural infrastructure & non-farm
employment
 Safety programs to cope with income shocks
 Extension services for livestock diseases

17
Publications

18
Publications

19
THANK YOU

20
Change in labor share
66.6% 63.8% 59.5% 56.5% 55.1%
33.4% 36.2% 40.5% 43.5% 44.9%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2010 2013 2016 Year
Farm labor share Non farm labor share

21
Change in Investment share
55.4% 56.9%
48.2% 43.8% 40.9%
44.6% 43.1%
51.8% 56.2% 59.1%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2010 2013 2016 Year
Farm investment share Non farm investment share

22
Change in income share
46.5%
65.1%
42.3% 41.8%
53.5%
34.9%
57.7% 58.2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2010 2013 Year
Farm income share Non farm income share

23
Change in farm income share
16.6%
23.1%
31.6%
39.2%
83.4%
76.9%
68.4%
60.8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2007 2008 2010 2013 Year
Livestock income share Crop income share

24
Determinants of agricultural investment
Dependent variable: farm
investments (log) in PPP$
Random Effects Fixed Effects
Coef. RSE Coef. RSE
Land rice size (log) 0.572*** 0.039 0.553*** 0.060
Having demography shock -0.140* 0.079 -0.153* 0.083
Having livestock 0.190*** 0.072 0.064 0.081
Having irrigation 0.003 0.133 0.451*** 0.135
Having non-farm job -0.355*** 0.107 -0.219** 0.111
HH age -0.019*** 0.003 -0.034*** 0.008
HH size 0.129*** 0.029 0.151*** 0.040
Assets (log) 0.132*** 0.034 0.127*** 0.043
No. time credit reject 0.106* 0.064 0.064 0.050
Observations 10280 10280
F/Chi2 651.69 16.005
Prob. > F 0.0000 0.0000
R-sq. overall 0.124 0.115

25
Determinants of rice yield
Dependent variable: Rice yield
(log) (in ton/ha)
Random Effects Fixed Effects
Coef. RSE Coef. RSE
Land rice size (log) -0.144*** 0.025 -0.334*** 0.027
Having agricultural shock -0.103*** 0.021 -0.071*** 0.020
Having irrigation 0.102*** 0.025 0.030 0.027
Fertilizer per ha 0.053*** 0.008 0.030*** 0.009
Machine per ha 0.025*** 0.005 0.012*** 0.004
Having non-farm job -0.053** 0.026 -0.029 0.028
Gender (female = 1) -0.141*** 0.040 -0.178** 0.088
HH size 0.088*** 0.030 0.052 0.044
Annual Rainfall (in mm/ha) 0.026*** 0.005 0.032*** 0.005
Observations 6727 6727
F/Chi2 382.300 35.389
Prob. > F 0.0000 0.0000
R-sq. overall 0.097 0.023

26
Result(3): Determinants of structural change
A.
investment
(ln) (PPP$)
(t-2)
Rice Yield
(ln)
(ton/ha)
(t-1)
Farm Labor
Share (%) (t)
Machine/
ha (ln)
(PPP$) (t)
Rice Area
(ln) ( ha) (t)
Assets (ln) (PPP$) (t-2) 0.382***
A. investments (ln) (PPP$) (t-2) 0.266***
Rice yield (ln) (ton/ha) (t-1) -4.652*** 4.040*** 0.331***
Having demographic shock (yes = 1) 0.414 -0.235* -0.049*
Having irrigation (yes = 1) -3.107*** 1.288*** 0.397***
Having non-farm job (yes = 1) -40.600***
0.748*** 0.012
Education of HH -0.220*** 0.058*** 0.003
Having livestock (yes = 1) 2.893*** -0.300** 0.176***
*, **, *** significant at 10%, 5%, and 1%, respectively, other factors not presented

27
Impact livestock on poverty reduction
Poverty indexes Having livestock Giving up livestock
KBM Radius KBM Radius
Head count (P0) -0.006 -0.007 0.098** 0.104**
Poverty gap (P1) -0.041 -0.039 0.047*** 0.050***
Poverty severity (P2) -0.043** -0.041** 0.025** 0.026**
Poverty line is 2 $PPP, *, **, *** significant at 10%, 5%, and 1%, respectively. Standard errors bootstrapped 1,000
replications
KBM = Kernel matching with common support and band width 0.06,
Radius matching with common support and band width 0.06.

28
Mean Rice Yields over the years
0
1000
2000
3000
4000
5000
6000
2007 2008 2010 2013 2016
Kg/ha
Year
Rice Yields over the years
Rice Yield

29
Mean Rice Yields against Lagged Investments
0
1000
2000
3000
4000
5000
6000
0
200
400
600
800
1000
1200
1400
1600
1800
2008 2010 2013 2016
RiceYields(kg/ha)
Investments$PPP/ha(t-1)
Year
Lagged investment Rice Yield

30
Lagged Investments and structural change
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
0
200
400
600
800
1000
1200
1400
1600
1800
2008 2010 2013 2016
RiceYields(kg/ha)
Investments$PPP/ha(t-1)
Year
Lagged investment Agri Labour share Off-farm labour share Machine Expenses

31
Structural Change in Vietnam

32Energy Economics – WS – 2017 – 2018
Income source
Share in total
household income
Gini coefficient for
income source
Percentage change in
Gini coefficient
Whole sample
Livestock income 0.112 1.157 0.022***
Other income 0.888 0.550 -0.022***
Total income 1.000 0.540
Subsample
Livestock income 0.153 0.754 -0.030***
Other income 0.847 0.550 0.030***
Total income 1.000 0.511
* Significant at 10%, ** significant at 5%, *** significant at 1%.
Whole sample includes households without and households with livestock in 4 years 2007, 2008, 2010, and 2013,
Subsample includes households without livestock and households with positive livestock income in 4 years 2007, 2008, 2010, and 2013,
The impact livestock on income inequality in period 2007-2013

Agricultural Investment and Structural Change: Evidence from Rural Vietnam

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