Lincoln University Digital Thesis Copyright Statement The digital copy of this thesis is protected by the Copyright Act 1994 (New Zealand). This thesis may be consulted by you, provided you comply with the provisions of the Act and the following conditions of use: you will use the copy only for the purposes of research or private study you will recognise the author's right to be identified as the author of the thesis and due acknowledgement will be made to the author where appropriate you will obtain the author's permission before publishing any material from the thesis. Household Livelihood Strategies, Environmental Dependency and Poverty: the Case of the Vietnam Rural Area A thesis submitted in partial fulfilment of the requirements for the Degree of Master of Commerce and Management at Lincoln University by Hong Ngoc Ta Lincoln University 2016 Abstract of a thesis submitted in partial fulfilment of the requirements for the Degree of Master of Commerce and Management. Abstract Household Livelihood Strategies, Environmental Dependency and Poverty: the Case of the Vietnam Rural Area by Hong Ngoc Ta This study explores households’ dependency on environmental income for households that engage in different livelihood strategies. This study also investigates the impact of environmental income on rural household poverty and inequality, and identifies factors that determine the choice of rural households’ livelihood strategies in rural communities in Vietnam. A cluster analysis identifies five livelihood strategies: wage dependency; non-farm, non-wage dependency; mixed-income dependency; transfer dependency; and environment dependency. Households engaging in various livelihood strategies differ in their asset endowments. Households engaging in environmental dependency strategy are more likely to have abundant labour, land and physical capital. However, those following more remunerative livelihood strategies, such as mixed- income and non-farm, non-wage dependencies, are more likely to be endowed in financial and social assets. Environmental income accounts for 40.65% of total household income, of which 36.89% comes from agricultural activities and 3.77% comes from common property resources extraction. In addition, the study finds that environmentally dependent households are the most reliant on environmental resources in both relative and absolute terms. Environmental income provides 82.48% of total income to households in this strategy group, which is worth about 11.8 million VND per capita per year. This amount is significantly higher than that of the other strategy groups. The findings confirm the contribution of environmental income to income inequality and poverty reduction. In terms of income inequality, on average, the inclusion of environmental income reduces the Gini coefficient by more than 20%, from 0.598 to 0.475. With respect to rural poverty, environmental income reduces the poverty headcount index, poverty gap and poverty severity by 28.0%, 22.5% and 18.7%, respectively. This study also provides evidence that households’ asset endowments and contextual factors have an important influence on the choice of household livelihood strategy. Family size, agricultural land ii owned, livestock herds, ownership of productive equipment and distance to all-weather roads all increase the likelihood that a household follows the environment dependency strategy. However, the educational level of the household head, social networks and credit loan accessibility has negative influences on the likelihood that a household is highly dependent on environmental resources. These characteristics constrain households from shifting to strategies that are more remunerative. Other variables also have mixed effects on the choice of household livelihood strategy. In terms of policy implications, the results of this study suggest that policies should focus on enhancing the productivity of agricultural land plots owned by households rather than increasing households’ access to common property resources. In addition, effective pro-poor policies should be targeted towards assisting the poor to shift to higher-return activities, such as wage employment and/or non-wage, non-farm businesses by investing in diploma education in rural areas, improving the road infrastructure and relaxing credit constraints in rural areas. Keywords: Environmental income, household livelihood strategies, poverty and inequality iii Acknowledgements Foremost, I would like to express my sincere acknowledgement to the New Zealand Government for offering me the opportunity to pursue my Masters degree at Lincoln University. I am also thankful to Sue Bowie, the Postgraduate and MFAT scholarship administrator for their/her kindly support, encouragement and advice. My deepest graditude goes to my supervisor, Professor Christopher Gan, who has consistently supported me from when I applied for the NZAID scholarship and then during my study at Lincoln Universty. His great patience and dedication, positve encouragement, critical comments and invaluable suggestions assisted me throughout this research. I could not have imagined having a better academic supervisor and mentor for my study. I also would like to express my appreciation to Dr. Baiding Hu and Dr. Ian MacDonald, my associate supervisors, for their invaluable discussions and suggestions at different stages of the study. Many friends have supported me during my two years of study in New Zealand. Their support and understanding assisted me in many moments of difficulty and encouaged me to stay focused on my thesis. I greatly appreciate their friendship that helped me adjust to, and experience, a new country. I also would like to thank Mr.Thiep Huy Do from the Central Institute for Economic Mangement (CIEM) for his assistance in understanding the VARHS data set and for providing helpful resources for my study. Most importantly, to my family, I owe a huge debt for their unconditional love, support and encourgement throughout my life. To my beloved husband, I would like to express my heartfelt graditute for his love and belief that gave me strength to chase my dream. Thank you for always being there when I needed you although we are thousand miles apart. My completion of this thesis would not have been possible without them. This work is dedicated to them. iv Table of Contents Abstract ....................................................................................................................................... ii Acknowledgements ..................................................................................................................... iv List of Tables .............................................................................................................................. vii List of Figures ............................................................................................................................ viii Chapter 1 Introduction ................................................................................................................. 1 1.1 Rationale of the Study.................................................................................................................... 1 1.2 Aims and Objectives ....................................................................................................................... 2 1.3 Research questions ........................................................................................................................ 3 1.4 Significance of the Study ................................................................................................................ 3 1.5 Structure of the Study .................................................................................................................... 4 Chapter 2 Literature Review.......................................................................................................... 5 2.1 Basic definitions: consumption, income, environmental income ................................................. 5 2.1.1 Consumption versus income ............................................................................................. 5 2.1.2 Environmental income ...................................................................................................... 5 2.2 Conceptual framework: the linkage between poverty, the environment and household livelihood strategies ....................................................................................................................... 8 2.3 The role of environmental income in rural households’ livelihoods ........................................... 10 2.4 Identify and measure environmental income and environmental dependence ......................... 12 2.5 The impacts of environmental income on rural household welfare ........................................... 12 2.5.1 Environmental income and poverty ................................................................................ 12 2.5.2 Environmental income and inequality ............................................................................ 14 2.6 Determinants of households’ livelihood strategy choices ........................................................... 17 2.6.1 Household asset-related factors ..................................................................................... 17 2.6.2 Contextual factors ........................................................................................................... 20 Chapter 3 Data and Methods .....................................................................................................