Seasonal migration and improving living standards in Vietnam.

The migration of labor out of agriculture is a primary feature of the economic development process. Both historically and in the present, the share of labor working in agriculture within a country declines as per capita GDP increases (Taylor and Martin 2001). In fact, if predominantly agricultural economies are to take full advantage of the geographically concentrated increasing returns to scale in industrial production (Krugman 1991), farmers must migrate to provide the industrial sector with labor.

Whereas migration is an important facet of economic development, the effects of migration on the rural areas migrants leave are complex. Migrants typically continue to have economic interactions with the source households and communities they leave behind (Stark and Bloom 1985), and these interactions are particularly important when markets do not function well. A growing literature on the effects of migration on source communities has documented both the use of migration as part of a household development strategy and the importance of source community networks for finding jobs in urban areas (Stark 1991; Carrington, Detragiache, and Vishnawath 1996).

However, the effects of migration and migration networks on households are difficult to identify econometrically, because unobservable factors that affect decisions about migration almost certainly also affect other decisions made by households. Two sources of exogenous variation that have been used to identify migration are weather shocks and historical events which change the cost of migrating. Munshi (2003) used weather shocks to villages in Mexico to identify the size of migrant networks among Mexican laborers in the United States. McKenzie and Rapoport (2004), Hildebrandt and McKenzie (2005), and Woodruff and Zenteno (2007) use varying time to completion of rail lines in the early 1900s, which facilitated the creation of networks to the United States, to identify the effects of migrant networks on inequality, health status among children, and microenterprise development, respectively.

Another source of exogenous variation that could be used to identify migration are institutional details unique to countries that had policies either relocating people or severely restricting migration in the past. In this article, we use an approach unique to Vietnam to help identify seasonal migration and its effects on household well-being. Rural Vietnam is organized into communes, yet 23% of people found living in rural communes in 19971998 were not born there (Lucas 2000). After the Vietnam War ended, there was a brief period of relocation, followed by a period of severely restricted movement. People born in either Hanoi or Ho Chi Minh City (HCMC) prior to 1975 were likely to have contacts in those cities that became useful again after restrictions on movement were lifted. As a result, communes with more members born in either city may have advantages in migration over members of other communes.

Vietnam is a particularly salient place to study seasonal migration for several reasons. First, its economy has been growing rapidly and rural-urban inequality has increased (Benjamin and Brandt 2004). As the rural-urban income gap grows, migration from rural to urban areas should increase (Harris and Todaro 1970). But Vietnam also lacks well-functioning markets, so households are likely to hold onto their land, which takes on additional value due to tenuous land rights. In the similar setting of China, researchers have not observed many whole families migrating, as they continue to work the land partially due to fear of expropriation (e.g., Jacoby, Li, and Rozelle 2002).

In this article, we document the effects of seasonal migration on household well-being, which we primarily measure using household per capita expenditures. Though Glewwe, Gragnolati, and Zaman (2002) described determinants of household expenditures in the Vietnam Living Standards Survey (VLSS), their analysis did not include variables that could be considered endogenous, such as migration or other variables. Our article extends their analysis to explore the effects of seasonal migration on household expenditures in rural Vietnam.

Our study has three primary objectives. First, we document the increase of seasonal migration in Vietnam during the 1990s. Second, we analyze the effects of seasonal migration on household consumption growth using instrumental variables and panel data techniques. We test our primary result for robustness by redefining household expenditures in two different ways, and we also test whether migration affects a nonmonetary measure of well-being, children's height-for-age z-scores. Third, we use our regression results in a counterfactual experiment, similar to the one conducted by Barham and Boucher (1998), to analyze how participation in seasonal migration has affected poverty and inequality measures. We explain the results of our experiment by discussing which part of the expenditure distribution migrants were more likely to come from.

The article proceeds as follows. After a short description of Vietnam's economy during the 1990s, we describe the data set and some patterns we observe in household expenditures and migration over time. Next, we provide a brief theoretical model, followed by the empirical model and justification for our instrumentation strategy. The following section presents our primary results, robustness checks, and implications for poverty and inequality. The final section concludes.

Economic Reform in Vietnam in the 1990s

Although Vietnam's Doi Moi reforms began in 1986, in several ways Vietnam's transition to a market economy accelerated during the 1990s. The collapse of the Soviet Union in 1989 may have been a catalyst for additional reforms, as Vietnam had been fiscally dependent on Soviet aid. After Soviet aid abruptly ended, Vietnam's government opened its economy to foreigners and made several reforms that affected rural areas. One such reform was decollectivization, which allowed individual households to farm their own plots and make decisions about inputs and crops.

Rural reforms led to significant increases in household incomes. As markets became increasingly open during the early 1990s, agricultural growth accelerated, and Vietnam became the second largest rice exporter in the world. Output growth in rice and other agricultural products can be attributed to the liberalization of fertilizer markets, which reduced input costs; the liberalization of output markets, which increased prices and exports; and the expansion of the individual household farming system (Benjamin and Brandt 2004). Through fertilizer market liberalization, the price of fertilizer fell throughout Vietnam. As internal trade barriers were removed, the producer price of rice increased in the South relative to the North, encouraging higher production in the South. As rice farmers in the South were also more efficient than farmers in the North, farmers in the North switched out of rice production in order to maintain their incomes. The switch was possible because markets for other products were growing rapidly and decollectivization gave farmers more control over crop choices. Therefore, market liberalization in agriculture benefited farmers in both regions (Benjamin and Brandt 2004).

Resolution 5, a new Land Law enacted in 1993, may have further improved rural economic performance. Land tenure was extended to twenty years for annuals and fifty years for perennials, and farmers were given the rights to transfer, lease, inherit, and mortgage land. Although the government continued to own the land and reforms were implemented slowly, land security increased and farmers began to invest in land productivity (Do and Iyer 2005). Improved land rights also enabled enable transfers from inefficient to efficient users and encouraged inefficient farmers to work off-farm. Although Ravallion and van de Walle (2003) estimate that only one-third of the initial inefficiency was eliminated through land use rights transfers between 1992-1993 and 1997-1998, Deininger and Jin (2003) suggest that smaller landowners gained greater access to land, as relatively rich people rented or sold land in order to move off-farm and increase their earnings. Therefore, the combination of recently improved land rights and more robust off-farm labor markets contributed to improved rural household welfare.

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