RIEB, Kobe University

Determinants of Rural-urban Inequality in Vietnam: Detailed Decomposition Analyses Based on Unconditional Quantile Regressions

This study examines determinants of the rural-urban gap of household welfare in Vietnam during 2008-2012 using national household data. We have used unconditional quantile regressions (UQR) 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. For these purposes, we have carried out detailed decomposition analyses 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. Remittances generally improve rural welfare, but do not reduce within- or between-inequality. Public policy should ensure easier access to education for the rural poor and support the self-employed to raise and stabilise income.