(by data)

Grant No.

08－069Research Report
Name : GIANG THANH LONG
Organization (at the time of the grant):

National Economics University (NEU), Hanoi, Vietnam
Title of Research:

POVERTY INCIDENCE OF THE VIETNAMESE ELDERLY IN THE FACE OF
ECONOMIC TRANSITION: DETERMINANTS AND POLICY IMPLICATIONS
Purpose of Research:
Rapid declines in fertility rates and mortality rates along with substantial improvements inhealthcare systems have resulted in the growth of elderly populations around the world, and thistrend is expected to continue in the coming years. Particularly for the developing countries thatwill grow old before becoming rich, population aging in the coming decades poses various policy
challenges for governments hoping to protect their elderly. Under such demographic changes, aswell as profound social and economic changes stemming from modernization and urbanization,
the weakening of family bonds also suggests an urgent task for the old-age security in developing
countries, where the social security systems are underdeveloped with limited coverage (Schwarz,2003; UN-DESA, 2007).
As one of the fastest growing economies in the world, Vietnam is indeed experiencing similarchanges, and may be facing ‘getting old before getting rich’ (Giang, 2009). The above-mentioned
population projections indicate that the elderly population in Vietnam as a percentage of thetotal population will increase significantly from 8.7 percent in 2010 to 26.6 percent in 2050.
Moreover, swift economic transformation since the renovation programs in 1986, known as Doi
moi, has had significant impacts on all areas of society, resulting in substantial improvements inliving standards for many people across the country. Though, many groups of elderly persons arestill living in poor rural or disadvantaged areas (Le et al., 2005). Only a small percentage of theelderly in Vietnam are receiving public pensions, and others provide for themselves and/orreceive support from family members (MOLISA, 2005; Giang and Pfau, 2007a,b; Giang, 2009).
Another worrying issue is that Vietnam has experienced a continuous decline in the number of
elderly living as dependents, and a continuous increase in the number of elderly living alone orin households with only elderly people (Giang and Pfau, 2007a; Giang, 2009). Any reduction infamily support caused by the aforementioned trends will leave the elderly subject to further
financial vulnerability. As such, researchers and policy-makers must understand the situationand challenges faced by the elderly population. This research is motivated by a desire tounderstand important determinants of elderly poverty in Vietnam to guide the selection of
appropriate policy measures to combat elderly poverty.
The present paper will also consider which types of elderly households are most vulnerable topoverty, but it will use various sets of household survey data for the time of economictransformation, i.e. 1992 to 2004. The paper will first describe the current status of elderly
poverty in Vietnam and then explore the possible factors underlying the circumstances of theelderly poor, using use a number of individual and household characteristics of the elderly. Wewill discuss the policy implications accordingly to our findings.

Contents/Methodology of Research:
We will first provide the current poverty status of the elderly and their households delineated byvarious characteristics. We will then identify the determinants of this poverty incidence.
Individual characteristics include age, gender, marital status, ethnicity and working status,
while household characteristics of relevance include residential regions, household living
arrangements, household composition, household head characteristics, as well as receipts ofsocial security benefits and remittances. Finally, based on the estimated results, we will discuss
policy recommendations for reducing poverty for the elderly and their households.

Measuring poverty
We will use the official poverty line defined by the GSO to estimate poverty rates for elderly
households. The poverty line is measured by average per capita expenditure for the household.
Therefore, the elderly poverty rate is defined as the percentage of the elderly whose average
household per capita expenditure is lower than the official poverty line. Table 2 presents thepoverty line defined by the GSO overtime.
Following Giang and Pfau (2009c), we will introduce construct two respective probit models forurban and rural elderly people, in order to identify the determinants of their poverty incidence.
Variables representing the individual and household characteristics of the elderly will beconsidered with the official poverty threshold.
An elderly person i (i = 1, 2,…, N, where N is the total number of elderly people) is considered tobe poor (pi = 1) if their household’s average per-capita expenditure is below the official povertyline. The probability of being poor can be estimated with a probit model as follows:P(pi = 1) = βiXi + ei,
where Xi represents a collection of relevant household and individual characteristics of theelderly, βi are the respective coefficients, and ei is the error term.
In addition, for each dummy variable, one subgroup will be chosen as the reference group. Forinstance, the variable ‘age’ includes three subgroups, 60–69, 70–79, and 80 years and over. The
60–69 year group will be used as the reference group. A negative and statistically significant
coefficient shows that the comparative group is less likely to be poor than the reference group,
whereas a positive and statistically significant coefficient indicates that the comparative group is
more likely to be poor than the reference group.

Variables
In both probit models, the variables representing individual characteristics of the elderly include:
Age: The elderly will be divided into three groups, including young elderly (aged 60–69 years),older elderly (aged 70–79 years) and oldest elderly (aged 80 years and over). We will use theyoungest elderly as the reference group, and we expect positive coefficients as among theelderly, poverty tends to rise with age.
Gender: We will use women as the reference group, and we expect a negative coefficient to theextent that men have lower poverty rates than do women.
Marital status: We will compare married elderly to non-married elderly. The latter includes
widowed, divorced, separated and never-married elderly. The non-married elderly will be thereference group. After otherwise controlling for household size, we expect this coefficient to be
negative as married couples will to tend enjoy better economic circumstances.
Working status: We will compare working and non-working elderly people, in which the latter
will be the reference group. The coefficient for working status is difficult to predict, as itmight be negative to the extent that labor earnings help to reduce poverty, but it also might
be positive if elderly are forced to work because they otherwise face difficult economic
circumstances.

In addition, we will use the following variables representing household characteristics of theelderly in our probit model:
Living arrangements: We divide the elderly households into three groups: (i) households with
only elderly (including elderly living alone and elderly living with other elderly people); (ii)households where the elderly are living with their children; and (iii) households where theelderly are not living with their children but are living with other non-elderly people. Thislatter group includes a variety of other possibilities, such as elderly living with
grandchildren, nieces or nephews, other relatives or even non-relatives. The first group willbe the reference group.
Residential regions: We will include eight economic regions in Vietnam, including Red River
Delta, Northeast, Northwest, North Central Coast, South Central Coast, Central Highlands,
Southeast, and Mekong River Delta. The Northwest will be the reference region.
Household composition: We will use three variables for this category, including: (i) thepercentage of the elderly household’s members who are under 15 years old; (ii) the percentageof the elderly household’s members who are of working age (15–59 years old); and (iii) thelogarithm of the elderly household size, which is measured by the number of household
members.
Head of household: We will consider two variables related to the household head, including: (i)elderly households headed by a woman, in which the households that are not headed by awoman will be the reference group; and (ii) elderly households headed by a working person,
in which the group of non-working household heads will be the reference group.
Receiving social protection benefits: We will use the elderly households that are not receiving
any social protection benefits as the reference group. Social protection benefits comprisesocial insurance benefits (pension, sickness and job loss allowance) and a social welfare
allowances.
Receiving remittances: We will use the elderly households that do not receive any remittances
as the reference group in our estimation. Receipts of remittances include both domestic andinternational remittances.
Conclusions/Observation
When undergoing rapid social and economic changes, an aging society produces potential
concern in terms of public policy, particularly the social welfare policies for protecting the elderly.
Vietnam needs an appropriate social security system to protect the elderly. To establish such asystem, the poverty incidence of the elderly and their households must be known, and thepossible factors underlying the circumstances of the elderly and their households must be
understood. Using the 2004 VHLSS with a variety of individual and household characteristics ofthe elderly, the present paper pursues the abovementioned research objectives.
We identify determinants of elderly poverty in Vietnam during economic transition, using
household survey data in 1992/93, 1997/98, 2002 and 2004. The elderly living in urban and rural
areas face significantly different conditions. Some factors impact poverty in both urban and rural
areas (e.g. age, region, and social protection and remittances receipt), some factors areinsignificant in both areas (e.g. living arrangements and household head characteristics) andsome factors have a differing impact in the two areas (e.g. gender, ethnicity, and householdcomposition and size). With these findings, we formulate policy priorities, including reducing
regional disparities, promoting the rural economy and reforming social security.
As urban and rural areas in general, and urban and rural elderly in particular, are differentiatedby a variety of aspects, based on our findings, we suggest that policies aiming at their protectionneed to be considered in dynamic ways. In other words, such policies must not only focus on theelderly population, but also deal with developmental issues for the country as a whole, where an
aging population, youth employment, migration and social protection, eroding traditionalhousehold living arrangements due to swift urbanization and modernization, regional
disparities, and gender inequality are some of urgent policy issues.
Regarding the social protection scheme for the elderly, UN-DESA (2007) shows that older
persons living in countries with comprehensive formal pension systems and public transferschemes are less likely to fall into poverty than younger people in the same population. Without
these formal systems, the elderly tend to rely on informal support from their families, whichmight not protect the elderly against the risk of destitution under swift social and economicchanges stemming from economic transformation. The limited coverage of the formal social
protection system means that there is inadequate income security for the elderly in Vietnam. In
light of the results of the present paper and those from Giang and Pfau (2009b), we suggest thatproviding social pension benefits to the elderly living in rural areas, or creating a universal
social pension scheme providing low benefits to a large number of beneficiaries would be
effective methods of reducing elderly poverty under limited financial and administrative
capacity.