National pro-poor spending programmes and their effect on income inequality and poverty: Evidence from Vietnam

Abstract

This article examines the causal effects of the national (pro-poor) targeted programmes (NTPs) on both poverty incidence and inequality in Vietnam over the period 2002-2010. While the links between NTPs and poverty alleviation and income inequality have previously been analysed independently, this study is the first to offer a comprehensive analysis of NTPs expenditure on poverty and inequality simultaneously. Applying the system generalised method of moments estimator to a panel of Vietnamese regional data, we are unable to establish that NTPs have significantly mitigated poverty incidence. However, we estimate that NTPs has significantly increased inequality. We offer possible explanations why NTPs have resulted in these unintended outcomes and discuss potential policies which can reduce both poverty and inequality.