UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS DOES REMITTANCE AFFECT ON BEHAVIOUR OF HOUSEHOLDS? A CASE STUDY OF TWELVE RURAL PROVINCES IN VIETNAM BY NGUYỄN NGÔ PHƯƠNG DIỆP MASTER OF ARTS IN DEVELOPMENT ECONOMICS HO CHI MINH CITY, October 2014 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM - NETHERLANDS PROGRAMME FOR M.A IN DEVELOPMENT ECONOMICS DOES REMITTANCE AFFECT ON BEHAVIOUR OF HOUSEHOLDS? A CASE STUDY OF TWELVE RURAL PROVINCES IN VIETNAM A thesis submitted in partial fulfilment of the requirements for the degree of MASTER OF ARTS IN DEVELOPMENT ECONOMICS By NGUYỄN NGÔ PHƯƠNG DIỆP Academic Supervisor: Dr. PHẠM THỊ THU TRÀ HO CHI MINH CITY, October 2014 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com DECLARATION This is to certify that the substance of this thesis entitled “Does remittance affected on behaviour of households?: A case study of twelve rural provinces in Vietnam”, which is submitted by me in fulfillment of requirements for the degree of Master of Art in Development Economic to the Vietnam – The Netherlands Programme. I certify that to best of my knowledge, any help received in preparing this thesis, and all sources used, have been acknowledged in this thesis. Nguyễn Ngô Phương Diệp 3 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ACKNOWLEDGMENT First of all, I would like to express my greatest appreciation to my supervisor, Dr.
Phạm Thị Thu Trà, for her advices, instructions and comments, patient guidance, as well as encouragement with all her heart during the time of studying and doing this thesis. Without her guidance, I could not implement and complete my thesis. I also would like to offer my special thanks to Dr.Phạm Khánh Nam and Lecturer Lê Anh Khang for the valuable suggestions and materials that help me to develop this thesis. In addition, I would like to special thanks to all the lecturers at the Vietnam – Netherlands Program for their knowledge of all the courses during I studied at the program.
Besides my mentors, I would like to thank my friends who are always beside me and support for my thesis. Last, but not least, I am very deeply grateful to my family. Without their warm encouragement, support, and attention, I would not be possible to complete this dissertation. 4 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABBREVIATIONS ATE Average Treatment Effect’ ATT Average Treatment effect on the Treated BPM Balance of Payment Manual DID Difference in Difference FDI Foreign Direct Investment FEM Fixed-Effect Model IMF International Monetary Fund NPISH NonProfit Institutions Serving Household ODA Official Development Assistance OLS Ordinary Least Square PSM Propensity Score Matching TFP Total Factor Productivity USD United States Dollar VHLSS Vietnam Household Living Standard Survey VARHS Vietnam Access to Resources Household Survey WB World Bank 5 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com ABSTRACT During the past decades, remittance becomes a new capital source in developing countries.
This capital flow which is increasing every year in the developing countries derived from origins such as exporting labors, or migration from countries with low income to countries with medium or high income. Remittance considered the stable capital flow for economic growth to labor exporting countries or countries with huge migration, helps reducing poverty through increasing income of households. Until 1986, in most cases remittance received by households living in Ho Chi Minh city in Viet Nam, after 1986 remittance inflow is expanded to households living in rural areas of Viet Nam by labor exporting policy. Up to now, remittance is increasing more and more, and it is also one of tools to alleviate poverty, and to enhance living condition of Viet Nam households.
So, the aim of this study will examine the effect of remittance on behaviours of households receiving remittance in rural Vietnam. Estimation of this effect based on impact evaluation method and data set of Vietnam Access to Resources Household Survey (VARHS) in 2006, 2008, and 2010. This data set was carried out by Institute of Labor and Social Sciences, a subsidiary of Ministry of Labor-Invalids and Social Affairs, in 12 rural provinces in North, Middle and South of Viet Nam such as Ha Tay, Lao Cai, Phu Tho, Lai Chau, Dien Bien, Nghe An, Quang Nam, Khanh Hoa, Dak Lak, Dak Nong, Lam Dong, Long An. 6 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com TABLE OF CONTENTS DECLARATION.
6 TABLE OF CONTENTS. 7 LIST OF TABLES. 9 LIST OF FIGURES. 16 CHAPTER II - THEORETICAL FRAMEWORK.
1 RELEVANT CONCEPTS AND BROADER ISSUES OF CONCERN .2 Literature of migration and remittances .3 Theory of Remittances. 2 LITERATURE REVIEW: REMITTANCES, INCOME, SAVINGS, ASSET, INSURANCE AND BORROWING. 3 SUMMARY OF LITERATURE REVIEW. 35 CHAPTER III - RESEARCH METHODOLOGY.
1 PROPENSITY SCORE MATCHING.1 Assumptions of PSM method .2 Model Specification of Propensity Score Matching. 2 DIFFERENCE IN DIFFERENCE (DD) METHOD. 44 7 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.3 Model of this study .3 COMBINING PSM WITH DID METHODS. 51 CHAPTER IV - EMPIRICAL ANALYSIS.
1 DESCRIPTIVE ANALYSIS OF THE SAMPLE.1 Propensity score matching (PSM) model .3 Combining PSM Method and DID Method. 68 CHAPTER V - CONCLUSIONS AND RECOMMENDATIONS. 2 LIMITATIONS AND SUGGESTIONS FOR FURTHER RESEARCHES. REMITTANCES DEFINED IN BALANCE OF PAYMENT OF INTERNATIONAL MONETARY FUND.
PROPENSITY SCORE MATCHING METHOD. DIFFERENCE IN DIFFERENCE METHOD. PSM AND DID METHODS. 147 8 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF TABLES Table 3.1 Variables of Propensity score Matching .2 Population in each province .3 Weight of Population in VARHS 2006, VARHS 2008 and VARHS 2010 .4 Variables of Difference in Difference Method .5 DID estimation between treatment group and control group.
1 Number of HHs receiving remittance and receiving no remittance. 2 Summary of Households with and without remittance .3 Expected sign in PSM Model .4 Expected sign of variables in DD model .5 Summary of Average Treatment Effect of on Treated Group .6 Summary the impacts of remittance by PSM method .7 Results of DID Method in 2006/2008 .8 Results of DID Method in 2008/2010 .9 Results of PSM - DID Method in 2006/ 2008 .10 Results of PSM – DID Method in 2008/2010. 71 9 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com LIST OF FIGURES Figure 1. 1 Global Remittances Inflow.
2 ODA, FDI and Remittance in Viet Nam from 2000 to 2011. 1 Neo-classical mechanism leading to equilibrium. 2 Motives for Remittances. 1 Example of Common Support.
2 An example of Difference in Difference. 46 10 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com DOES REMITTANCE AFFECT ON BEHAVIOUR OF HOUSEHOLDS? A CASE STUDY OF TWELVE RURAL PROVINCES IN VIETNAM CHAPTER I - INTRODUCTION 1. 1 Problem Statement Increasing remittance during the past decades revealed as the special phenomenon in developing countries. According to World Bank’s statistical figures indicated, that remittance has been quickly increasing over the past decades.
In 1990, global flow of remittance is from 68 billion USD, up to 131 billion USD in 2000, and 440 billion in 2010 as in Figure 1. This is an important source of external capital contributing to economic growth and development as well as reducing poverty of households in developing countries. Stemming from remittance, working papers studied positive or negative effects of remittance on income, asset, borrowing and saving as mentioned below supplying empirical evidences in developing countries. 1 Global Remittances Inflow Source: Migration Policy Institute, World Bank, 2011.
11 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Since the policy of “Doi moi” in 1986 and the even more radical market-oriented reform of 1989, Viet Nam has been considered the country with high economic growth. Average Gross Domestic Production growth in Vietnam is 7. The factors have contributed for economic growth including capital, labor, and Total Factor Productivity (TFP), in which capital is count for more than fifty percent. There are two kinds of capital such as foreign investment and domestic investment.
Foreign investment includes Foreign Direct Investment (FDI) and Official Development Assistance (ODA), and domestic investment is derived from saving of households, enterprises, and government. Household saving is the major source of domestic investment and apart of household saving stems from remittance. According to World Bank (2011), Vietnam is ranked in top 20 remittance- receiving countries in the world, and the second in East Asia & Pacific after Philippines. Remittance flowing in Vietnam was increasing from 1.34 billion USD in 2000 to 8.6 billion USD in 2011.
In comparison with Official Development Assistance (ODA) in Vietnam, remittance has been more increasing and higher than ODA since 2002 to now, and remittance was higher than Foreign Direct Investment (FDI) in 2010 and 2011 (Figure 1. Remittance is increasing year by year and becomes a stability finance for income smoothing, as well as economic growth in developing countries and Viet Nam particularly, during the past decades. Remittance inflow in Viet Nam is derived from two sources including Vietnamese immigrant and labor exporting. Before 2000, Viet Nam received remittances from Vietnamese immigration to the United States between 1971 and 2001 (Wade D.
Since 1994, remittances have been sent by Vietnamese workers in developed countries. Labor exporting in Viet Nam is policy of Government; in particular, the Law and regulations encourage labor exporting for purposes such as creating jobs, stabilizing social security, enhancing standard living, 12 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com and poverty reduction in provinces of Viet Nam. The beginning is Conference Resolution of Party Central Committee No.02/NQ-HNTW dated December 24th, 1996 mentioned training skilled workers for industrial zones, export processing zones, taking into account the demand for labor export. The next is Law No.
72/2006/QH11 dated November 29th, 2006 of Government promulgating Law on Vietnamese guest workers; and in particular Decision No.71/2009/QD-TTg date April 29th, 2009 approved the Project of supporting the poor districts for labor exporting to reduce sustainable poverty in period 2009-2020. The latest is Instruction No.19-CT/TW dated November 5th, 2012 of Viet Nam Party Central Committee on enhancing the Party's leadership to train vocation for rural workers. 2 ODA, FDI and Remittance in Viet Nam from 2000 to 2011 Source: World bank (2012). 13 LUAN VAN CHAT LUONG download : add luanvanchat@agmail.com Remittance is increased rapidly by Labor exporting policy of Viet Nam Government, however, the households having members attending labor exporting whether changing being better than not attending, especially in rural provinces.
Based on these literatures and empirical evidences, the aim of this study considers connection of remittance and its influence on rural receiving-remittance households in Vietnam. 2 Research Objective Based on mentioned above concerns, the thesis was carried out for the purpose exploring whether or not there were any effect of remittance on behaviour of households receiving-remittance in Vietnam rural, based on a comparison between households with and without remittances. By applying research result to reality and based on collected data, the thesis will then suggest the recommendation relating how to use remittances to improve living condition in rural households. 3 Research Question By limiting the objective of this research to twelve provinces in rural Viet Nam, this thesis tried to outline the income receiving-remittance and receiving-no remittance rural households.
Specifically, we tried to find the answers to the question “How is effect of remittance on behaviour of rural households receiving remittance in Vietnam?” 1. 4 Scope For the recent decades, remittance inflow becomes diverse in Viet Nam, it is not only focus on big cities as Ho Chi Minh city and Ha Noi city but also move to other urban and rural areas, and origins of foreign remittances derived not only from immigrating relatives of households but also from exporting labor.