drastically reduced. It is indeed within the sets of conditions for either an optimistic or pessimistic future scenario, combined with population and redistribution.

In a future with high redistribution, low population growth and skilled workers, poverty is low if agriculture productivity growth is higher than 2% per year (Table 2) for unskilled workers. Total agricultural productivity growth depends also on the skill premium in the agriculture sector and lies between 5% and 10% per year in these scenarios.

Such growth rates are comparable to the average growth rates of productivity growth in China (4.7%), Malaysia (4.9%) or Mongolia (7%) over the past ten years, but are higher than what Vietnam has been able to achieve in the recent past (2.4% per year on average between 2002 and 2012).

On the other end, in order to avoid being in the most pessimistic cases if redistribution is low, population growth is high and the share of skilled workers is lower, agricultural productivity growth has to be higher than 5% per year for unskilled workers (Table 3). This threshold correspond to a minimum growth rates of 3 to 9% per year for total agriculture growth, depending on the skill premium.

In a nutshell, to have good chances to reduce poverty, Vietnam must see an agricultural productivity growth of at least 4‐5% per year on average over the next 15 years, with at least 2‐3 % income growth per year for unskilled workers.

# **Choice of two representative scenarios**

To analyze the impacts of climate change, we first choose two scenarios among the hundreds that were run, one optimistic and one pessimistic. To select one representative scenario in each group, we select only scenarios that correspond to the boxes (i.e. the combinations of drivers most representative of the scenarios in each group) and apply the following additional criteria. For the pessimistic scenario we selected a scenario with a total income growth that is close to GDP growth in the SSP4 (the SSP scenario in which poverty and inequality remain high) and minimized structure change (to represent stagnation). For the optimistic scenario, we tried to be in line with the “Vietnam 2035” scenarios so we aimed at 7‐8% annual growth for total income, while minimizing the share of workers in agriculture and maximizing the share of workers in industry, and making sure that skill premiums are not too different between sectors.

# **_Prosperity scenario._**

This scenario is optimistic in that it assumes that extreme poverty is eradicated in Vietnam in 2030 (no one lives with less than 1.25usd per day in Vietnam, and only 5 million people live with less than 4usd per day);<sup>2</sup> that population growth is slow (population follows the SSP5 trend), education levels and labor productivity increase rapidly; and that the productivity gap with developed countries decreases quickly (GDP grows at 7.6% per year on average by 2030, and the participation in the labor force increases by 17% in 2030 with regards to 2007). It also assumes that there is fast globalization and technology transfers between countries, allowing rapid structural changes in Vietnam and the reduction of the share of

> 2 These simulations are performed using 2005 PPP exchange rate and the $1.25 extreme poverty line, but results are not expected to change significantly under the $1.90 poverty line and using 2011 PPP.

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