UNIVERSITY OF ECONOMICS INSTITUTE OF SOCIAL STUDIES HO CHI MINH CITY THE HAGUE VIETNAM THE NETHERLANDS VIETNAM- THE NETHERLANDS PROJECT FOR M. IN DEVELOPMENT ECONOMICS DETERMINANTS OF COMPUTER OWNERSHIP: CASE OF HOUSEHOLDS IN VIETNAM By: VO THI THANH NGA Academic Supervisor: Dr. VO VAN HUY B¢ GIAO ~UC VA DAO T~O TRUONG OH KINH TE TP.HCM THU VIF.:N HO CHI MINH CITY, 2007 TIEU LUAN MOI download : skknchat@gmail.com ACKNOWLEDGEMENTS This thesis is a very important research during my study and it would not have been possible without the support and encouragement of many people. First and foremost, I would like to acknowledge Dr.
Vo Van Huy, my supervisor, for his detailed correction and guidance throughout the th~sis process. I am grateful to Prof. Karel Jansen, Dr. Nguyen Hoang Bao and Dr.
Nguyen Trong Hoai for their insights and useful comments on the thesis. Sincere thanks go to my friends, Mr. Nguyen Ngoc Danh for his kind help in data issues and Mr. Nguyen Van Cong for his inspiration and support.
I also would like to thank Ms. Dang Kim Chi, the librarian, for her kindness to me throughout my study. to thank other professors, lecturers, classmates in the Project and other teachers and friends of mine for their help and friendship. As for my parents, I just cannot thank them enough for their unconditional love and support.
TIEU LUAN MOI download : skknchat@gmail.com CERTIFICATION I certify that the substance of this thesis has not been submitted for any degree and is not being currently submitted for any other degree. I certify that to the best of my knowledge, any help received in preparing this thesis and all sources used have been acknowledged in this thesis. ii TIEU LUAN MOI download : skknchat@gmail.com ABSTRACT Low computer ownership rate has been proved to lead to low quality of life of households, slow down the economic development and make government administration less efficient. This study investigates the determinants of computer ownership for the case of households in Vietnam, a developing country with a very low computer ownership rate.
The author reviews the literature and employs the Logit model and descriptive statistics to model the computer ownership and use; the data from the Vietnam Living Standard Survey 2004. Results support the empirical evidences that household socio-demographic characteristics greatly influence that household ownership of computer, which identifies the digital divide between types of households and regions. Based on the results and empirical projects that have been carried out to enhance the computer availability, policy recommendation is given. lll TIEU LUAN MOI download : skknchat@gmail.com TABLE OF CONTENTS Page Chapter 1.2 Objective of Study .3 Methodology and Scope of Research.
LITERATURE REVIEW AND RESEARCH METHODOLOGY 2.1 Basic Terms and Concepts .2 Economic Theories of Consumer Behavior .1 Neoclassical quantitative models of consumer behavior .1 The Indifference Curve Model.2The Marginal Utility Model.2 Demand for durable goods and qualitative choice models .3 Justification ofthe models .1 Methods of empirical researches applied .1 Methods of Internet access estimation .2Methods of computer use, computer expenditure and computer ownership estimation .3Justification ofthe methods in empirical studies .2 Major findings in empirical studies .1 Determinants of internet access .2Determinants of computer use, computer expenditure and computer ownership .3Justification of the determinants in empirical findings and some suggestions in the thesis research model .4 Econometric Model Specification. 21 IV TIEU LUAN MOI download : skknchat@gmail. AN OVERVIEW OF THE COMPUTER MARKET AND COMPUTER OWNERSHIP IN VIETNAM 3.1 An overview of computer ownership, computer market and empirical projects to enhance the computer ownership in Vietnam .1 An overview of computer ownership of households in Vietnam .2 Computer market in Vietnam and prospect after Vietnam joined WT0 .3 Some projects that have been carried out to enhance the computer ownership of households .2 Descriptive analysis on factors affecting computer ownership of households in Vietnam in VLSS 2004 .2 The logit model in this study's estimation .3 Logistic regression results .4 Goodness-of-fit .1 Coefficients and expected signs .3 Probability estimated at different initial probability. CONCLUSIONS AND POLICY IMPLICATION.
Calculating P(computer)new from initial probability. 65 v TIEU LUAN MOI download : skknchat@gmail.com LIST OF TABLES. Number of computers of Vietnam in comparison with other countries in 2005. The probability of computer ownership in Vietnam.
Hardware market value in Vietnam 2000-2005 (million USD). Mean of characteristics by groups of ownership and non-ownership. Percentage of households owning a computer by income quintile. Computer ownership by groups of households with head's education highest qualification.
Group of households by binary characteristics. Groups of households by region and their computer ownership. Unrestricted logit model. Restricted logit model.
Coefficients and expected signs. Interpreting in terms of odds ratios. Interpreting probability changes at different initial probability. 54 LIST OF FIGURES AND CHARTS Figure 1.
Components oflnformation Society Index. Households with a home computer, 2000-2005, percentage of all households. Percent of households owning computer(s) by different education attainment of household head. Percentage of households owning a computer by geographical regions .43 LIST OF BOXES Box 1.
Success of Thanh Giong Project Vl TIEU LUAN MOI download : skknchat@gmail. Problem Statement Joining the WTO in November 2006, Vietnam made a remarkable step on the way of integration into the global economy. However, its sustained success in international competition will depend increasingly on basic education, science, technology and innovation (UNDP Vietnam, 2002). Besides undeniable positive impacts of computer use in work places, many researchers believe that computers influence households profoundly.
A computer in the home often serves three functions: (1) interpersonal communication; (2) information acquisition; and (3) entertainment (Papadakis 2001 ). More and more households own computers nowadays due to: (i) the availability of affordable computers for households; (ii) the user-friendliness of horne computers and; (iii) the expansion of home-based business (Wen Yin 2003). Significantly, in Vietnam, more than 50% of households are household enterprises (World Bank, 2004). Computer ownership, therefore, plays an important role in improving the quality of life for every household.
For the whole economy, the use of information and communication technologies (ICT) by households, including the use of computer, undoubtedly has impacts on economic performance, according to a research by OECD (liS report 2005:47), because: (i) the demand for ICT goods (e. computers) by households has stimulated the growth of ICT sector and ICT applications; (ii) this has stimulated demand for products in sectors which rely heavily on ICT (e. media and entertainment), which leads to the growth in those industries as well; (iii) in the future, the wide diffusion of ICT and e-commerce can help firms to deliver their products to households more efficiently; (iv) ICT use by household can benefit companies that require experienced ICT users. TIEU LUAN MOI download : skknchat@gmail.com For the government, computers to households and access to the Internet is a way of education, access to information and policy propagation.
In other words, computer use by households plays a big role in improving the quality of life for households, making profound impacts on the whole economy and helping the government administration more efficient. According to the Vietnam Development Report 2004 by the World Bank, the poverty rate has been reduced dramatically in the past 5 years: from 17.3% in 2004 and 7% in 2005. On average, 340,000 poor families escape poverty each year. However, to have a complete computer set, one must have at least 500 USD 1 while the GDP per capita for Vietnamese in 2005 was only around 640 USD and around 715 USD in 2006.
Low income makes computer unaffordable for many households. Only 5% of households in Vietnam own a computer (VLSS 2004 ), a very low rate compared to that in 2004 of a developed Asian country like Korea (78%) 2. Low computer ownership rate, as proved above, leads to low quality of life of households, slows down the economic development and makes government administration less efficient. Severely, the absence of computer in a household can cause social and economic disadvantages to that household, leading to social exclusion (Papadakis 2001).
This creates the gap in ICT adoption between members in the society, called the "digital divide". The extent to which the digital divide exists and why it exists, therefore, must be addressed. In other words, the issue to be explored is the computer adoption of households in Vietnam. "Given the scarcity of computers in low- income countries like Vietnam, an operational strategy of increasing computer availability and skills would seem to offer considerable hope for increasing the incomes for the poor" (World Bank 2003).
1 Hoan Long computer price list, Dec 2006 2 Korean National Statistical Office 2 TIEU LUAN MOI download : skknchat@gmail.com Unfortunately, there has been no research on computer ownership of households in Vietnam so far. Therefore, studying the determinants of computer ownership for the case of households in Vietnam is chosen for the thesis research. Objective of the Study My study aims to answer the following questions: What are the main determinants of computer ownership of households in Vietnam? How is the current situation of the computer ownership of households and computer market in Vietnam today? How is the current digital divide in Vietnamese households? What can be done to improve the probability of computer ownership for households in Vietnam? The author aims to develop a conceptual model for estimating the demand for computer of households in Vietnam, and correspondingly suggest policy implications. For policy makers, the research aims to give an overview of the demand for computers of households in Vietnam.
Based on the most significant determinants of computer ownership and from that, policy makers can have positive policies to enhance the computer availability, particularly in rural and remote areas to minimize the risk of social exclusion. Besides, the government can estimate the demand for computer ownership and have a master plan for the development the computer industry together with the relevant plan for the development of the telecommunication system (internet broadband, telephone lines. ) and supporting industries (other electronic production). For producers, the estimation of computer ownership while other determinants change can help computer producers to forecast the production and the targeted market.
This comes from the answer to the question: "Which types of 3 TIEU LUAN MOI download : skknchat@gmail.com households tend to own computer most?" Facing the harsh competition after joining the WTO when the tariff on computer sets and computer components will gradually reduce to 0%, producers must have relevant strategies to provide products of higher quality at lower price to consumers. Methodology and Scope of Research To answer the research questions, both econometric model and descriptive statistic methods are used to examine the relationship between the dependent variable computer ownership and its determinants. Mainly, the Logit model is used to estimate the determinants of the computer ownership of households in Vietnam. Besides, descriptive analysis about the situation of Vietnam computer purchases, computer use and computer manufacturing.
This research is mainly based on secondary data, taken from Vietnam Household Living Standards Survey 2004 (VLSS 2004 ). This survey is carried out by the General Statistics Office of Vietnam, with the support by the World Bank and the Swedish International Development Agency (SIDA). The data is collected throughout the country with the sample size of 45,900 households (36,720 households were surveyed on income, 9,180 households were surveyed on income and expenditure) of 3,063 communes, representing for the whole country with 8 regions, urban and rural areas, provinces and cities. As the thesis mainly depends on the expenditure of the household rather than income, so the sample size will be around 9, 180.
The reason for expenditure base will be explained later on. Particularly, the survey is well-designed, therefore, to take advantage of the available data, the author hope that the result should give an overview of the whole country. Descriptive analysis is also based on secondary data from VLSS 2004 and other domestic and international data sources .