Assessing Impacts of Income Diversification on Vietnamese Household Welfare Using Quantile Regression and Longitudinal Data

Abstract

This study examines the heterogeneous and dynamic effects of income diversification on Vietnamese household welfare measured by total income and consumption expenditure. Based on a risk management perspective and prior studies, households with different income levels may have different income diversification strategies. In the analysis, we use quantile regression for both pooled and cross-sectional data across regions. The effects from Simpson’s diversity index, as the measure of income diversification, show mixed results. During the early period of study, income diversification raised the welfare of most households. However, the trend was reversed in the later period. This generates concern for low-income households and their income sources are less diversified. For higher-income households, the adverse effects are due to their focus on fewer economic activities, with wage earnings being their main source of income.