UNIVERSITY OF ECONOMICS ERASMUS UNVERSITY ROTTERDAM HO CHI MINH CITY INSTITUTE OF SOCIAL STUDIES VIETNAM THE NETHERLANDS VIETNAM –THE NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS CLIMATE CHANGE AND INCOME DIVERSIFICATION IN THE MEKONG RIVER DELTA: A PANEL DATA ANALYSIS BY NGUYEN THI TUYET NGA MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, December 2016 123doc UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHIMINHCITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS CLIMATE CHANGE AND INCOME DIVERSIFICATION IN THE MEKONG RIVER DELTA: A PANEL DATA ANALYSIS A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By NGUYEN THI TUYET NGA Academic Supervisor: PHAM KHANH NAM HO CHI MINH CITY, December 2016 123doc ACKNOWLEDGEMENT I would first like to thank my thesis supervisorDr. Pham Khanh Nam of the Vietnam – The Netherlands Programme (VNP) at Ho Chi Minh City University of Economics. He consistently allowed this paper to be my own work, but steered me in the right direction whenever he thought I needed it. I would like to express my gratitude to the VNP officers who were involved in mythesis processby updating thesis schedule and providing good conditions for my research process.
Without their passionate participation, the thesis process could not have been successfully conducted. Finally, thanks are also due to my classmates for providing me with unfailing support and continuous encouragement throughout my years of study and through the process of researching and writing this thesis. This accomplishment would not have been possible without them. Nguyen ThiTuyetNga Ho Chi Minh City, December 2016 Page i 123doc ABSTRACT The main objective of this study is to analyze the impact of climate change and other socio – economic determinants on the income diversification strategy in Mekong River Delta.
The data set is drawn from the VHLSS 2010,2012 and 2014, while climatic data including temperature and precipitation are extracted from the statistics website of The Ministry of Agriculture and Rural Development (MARD). Salinity data is collected from the Vietnam Institute of Meteorology, Hydrology and Climate Change.Findings of the study show that farmers have tendency to diversify their activities to reduce risk of crops failure when there is increasing temperature in dry season and precipitation in wet season. However, it is recognized that those relationships are non-linear. Diversification behavior is discovered not to be sensitive with the salinity intrusion and other climate variables.
Regarding socio-economic determinants, the household labor ratio and land area holding are found to be positively correlated with the income diversification, while educational qualification has the negative effect. A male household head would more likely to diversify their activities to disperse risk of climate change than female head. From this result, many policies are recommended in order to support farmers to access an effective diversification strategy, helping them to response actively to climate change consequences. Page ii 123doc TABLE OF CONTENT Chapter Page Acknowledgement.
ii Table of content. iii List of tables .v List of figures. Impact of climate change. Adaptation of people to climate change.
Definition and classification of income diversification. Motivations of income diversification. Income diversification measurements. Impact of temperature and precipitation variation.
Impact of high salinity intrusion to income diversification. Impact of socio-economic characteristics on income diversification .1 Income diversification index .20 Page iii 123doc 3. Result and discussion. Overview of the Mekong River Delta.1 Geographical position and natural conditions .2 Socio – economic conditions .3 Impact of climate change on the Mekong River Delta.
Salinity intrusion in the Mekong River Delta. Descriptive statistics of variables. Findings of the Poisson model. Findings of the Tobit model .3Research limitations and research directions .57 Page iv 123doc LIST OF TABLES Table 3.Results of the panel Poisson model and panel Tobit model .42 Page v 123doc LIST OF FIGURES Figure 3.Salinity stations in Mekong River Delta .GDP share per sector in Mekong River Delta .Regional Division of Mekong River Delta .The salinity intrusion map of Mekong River Delta .Income shares of households in Mekong River Delta .Precipitation in Mekong River Delta .Temperature in Mekong River Delta .Salinity at stations in Long An and Ca Mau – Bac Lieu .Marginal effect of precipitation in wet season .Marginal effect of temperature in dry season .Salinity at stations in Mekong River Delta .59 Page vi 123doc CHAPTER 1: INTRODUCTION 1.
Research problem Climate change has been the most controversial issue in the world due to its significant impacts on many aspects of society and economy in which agriculture is the most vulnerable sector. The variationof climate conditions is reflected through temperature rising, abnormal precipitation, droughts, or floods. Thoseare the main reasons for insects, diseases, and crop failures (Zerihun, 2012). Climate change is generally harmful for crop production, but indeed, the impact is much diversified (IPCC, 2014).Specifically, higher temperature shortens the growing period of rice, leading to rice yield reduction; however, in some study the increased CO2 from the pollution has supported the photosynthesis process of some crops such as maize and wheatresulting in a better productivity of cereals.
In Japan, the increase of 1oC in the 20th century has resulted in the drop of wheat, vegetables, milk, and egg production. In Russia, the potential production of major crops is acknowledged to fallby 50% on average due to the climate change.On the other side, climate change does notgive identical effects on agriculture sector in different areas in the world due to alternative natural conditions and specific socio-economic characteristics of each region. All demographic properties and adaptive solutions of people in an area are the main factors, which determined the vulnerability to climate change.In spite of diversified impacts,it is undeniable that climate change has severely affected food security all over the world. Being the second biggestrice exporter in the world just after Thailand, Vietnam has 90% of exported production derived from the Mekong River Delta.
Located nearby the final branches of Mekong River before converging into the ocean, Mekong River Delta is the wide fertile area, which is appropriatefor rice paddy cultivation and is known as the biggest rice granary in Vietnam. However, in recent years, Mekong River Deltaisseriously exposed to threat of climate change, which is clearly shown in high saline intrusion in coastal areas, droughts, and the shortage of fresh water in dry season, resulting in the restriction of arable land.In particular, according to the projected climate scenario in 2100 of the Ministry of Agriculture and Rural Development, if the sea level risesby 1meter, an approximate of 40% arable land could be sunk in salt water. The yield shortfall has significantly caused the Page 1 123doc income loss for farmers, theincrease of poverty, and the social insecurity at the same time. However,overcoming all difficulties of natural conditions, Mekong River Delta still keeps a stable development rate of production.
In order to deal with environmental challenge, farmers have applied many solutions to adapt with climate change and improve their lives. In those solutions, income diversification is considered as an effective response to climate change (Smit et al., 2000; Bryan et al. Specifically, income diversification helps farmers to reduce the risk of crop failureand increase household’s total revenue (Zerihun, 2012;Haiwang et al.Income diversification process is understood as the way in which farmers participate in manyactivities to generate incomefor their households. For example, household’s income sources could stem fromgrowing varieties of rice, fruits and other cereals; livestock breeding; aquaculture rearing; or non-farm activities.
Although income diversification is observed in various levels, researchers still concern aboutthe drivers of income diversification. Several studies suggested that drivers are temperature, drought, salinity,price change, and institutional change. Understanding separate channels that lead to the farmer’s behavior on diversifying income is important since it allows policy makers to know what to focus on in their policies for farmers. Moreover, drivers of income diversification in the Mekong River Delta could be different from other areas and in the world where evidences could be found.Specific evidences for the Mekong River Delta are what policy makers need.
In Vietnam, income diversification process, which is considered as an effort to reduce thethreatens of climate change, is favorablyrecommended for farmers by Vietnamese Government.Besides,Government policies also relate to the improvement of physical infrastructure, financial subsidy, and the openness of agriculture market. However, both uncertainties about determinants of income diversification and the response of farmers to climate changecould lead to the inefficiency or less efficiency of Government supporting policies. Therefore, a research of climate change and income diversification could producereliable and sustainable evidences for policy makers about the impact of climate change on income diversification. Based on those empirical findings, policy makers could implement policies, which are more efficient to support farmers in income diversification process.
Research objective The main objective of this study is to analyze the impact of climate change on the degree of incomediversification. Climate change is reflected by the variation of temperature, precipitation, and salinity intrusionin both dry season and wet season.Besides, other socio- economic characteristicsare also investigated to clarify the responses of different households in term of income diversification behavior. Relying on the empirical findings, this study helps policy makersto understandhow farmers diversify their income, the reliable determinants of income diversification, and the behavior of farmers with different socio-economic characteristics to climate change through income diversification. Then, policy makers could design current and futurepolicies that are more appropriate for farmers.
Those policies could reduce the potential risks of a specific conventional agricultural activity due to harmful effect of climate change, maintain and improve the living standard of farmers. Research scope This study employs apanel data analysis for 362 households in the Mekong River Delta of Vietnam, which is a coastal areaseverelyaffected by the climate change. Most of households participate in the agricultural activities, which are the most vulnerable sectors. The time span for the study is the period2010 – 2014 whichdraws an overall picture of the impact of climate change and other socio-economicfactors on the income diversification, a common and effective approach of adaptation.
Thesis structure The remaining of this study includes four chapters.Chapter 2 concentrates on theoretical and empirical reviews from previous studies.Chapter 3 gives analytical framework of the studyin term of empirical model and variable description. Chapter 4 shows us the data description and givesempirical findings of the impact of climate change and other socio-economic determinants on income diversification behaviors in Mekong River Delta. Finally, chapter 5 summarizes the main findings of research paper, suggests policy recommendations, figures out research limitations, and gives several further research directions. Page 3 123doc CHAPTER 2:LITERATURE REVIEW The chapter starts with the review of relevant issues on climate change, including the concept, the impact and the response of people to climate change.
Then, the chapter provides a brief theory on the motivations of income diversification, an effective adaptation behavior to climate change and approaches to measure diversification degree. An overview of empirical researches contributes to the construction of a framework for estimating the impact of climate change and other determinants on income diversification. Climate change Climate change is defined as: “A change in the state of the climate that can be identified by changes in the mean and/or the variability of its properties, and that persists for an extended period, typically decades or longer. It refers to any change in climate over time, whether due to natural variability or as a result of human activity”(IPCC,2007).That definition has a little difference from the explanation of the United Nations Framework Convention on Climate Change (UNFCCC) onclimate change: “A change of climate that is attributed directly or indirectly to human activity that alters the composition of the global atmosphere and that is in addition to natural climate variability observed over comparable time periods” (UNFCCC,1992).
Following the definition, climate change could originate from natural changes of global climate such as the change of the Earth’s orbit, the ability to receive energy from sun, and volcanic eruption.