The Role of Services in Rural Income : The Case of Vietnam

This paper investigates the role of
services in the household response to trade reforms in
Vietnam. The relative response of the households and income
growth after a major trade liberalization in rice are
analyzed aiming to answer the following questions: What type
of households, in which locations, having access to what
type of services, benefited more from the reforms? It
focuses on services that have an impact on transaction costs
(roads or quality of roads, public transportation, access to
credit, extension services, and availability of markets in
communication services) because transaction costs are often
cited as a barrier to rural households in responding to the
price changes and increased incentives offered by trade and
other policy reforms. The results suggest that availability
of production related services contributes positively to the
impact of trade reforms. Although most of the service
variables have a positive and significant effect on growth
in income, some that are expected to have an impact are not
significant. This may be explained by the exceptional
coverage of infrastructure services in Vietnam even before
the reforms. When service availability is very similar
across different localities, household characteristics
become more important in determining the response.