# **7. Conclusions**

This paper estimates expenditure and price elasticities for the main categories of goods and services in Vietnam. Results show that education has low responsiveness to income changes despite higher and vocational/technical schooling is expensive in Vietnam and households bear most of the costs. This suggests that Vietnamese households are keen to improve their education level, which can lead to higher wages, healthy behavior and poverty reduction. Moreover, education is a complementary driver of household consumption and healthy behavior.

While electricity became a necessity with the economic growth, telecommunication, health care, household appliances and clothing are income elastic and their consumption changes significantly across income levels. Important services such as electricity, telecommunication and health care are own-price inelastic, but this can be an effect of current policies and subsidy schemes designed to keep prices low and widen the access to these services to most households, especially for the poorer groups of the population.

These results provide new and updated evidence in support of understanding recent development patterns and fast socio-economic evolution occurred in Vietnam in the last 20 years. While Vietnam’s shift from a low- to a middle-income country happened fast, the continuation of this trend towards becoming a high-income country necessitates further reforms and upgraded economic policies. Given the large amount of FDI, new reforms in Vietnam should especially consider the new international geopolitical balance and focus on closing the productivity gap between domestic and foreign firms. While basic services have reached almost universal access in both rural and urban Vietnam, disparities in the quality of such services are still an issue that current and future reforms could address, especially in terms of health care and higher education. This could be done taking advantage of the diffused access to telecommunication services, with the government investing in the digitalization of public and private administration and procurement, favoring inclusive finance and education such as e-payments and e- learning.

Other structural challenges that could be addressed to reduce inequalities and improve inclusiveness are the transparency of administrative and legal decisions, often percevied by households and businesses as based on favoritism or corruption; and the reduction of barriers to the labor market (e.g. inadequate training, limited information, insufficient mobility) that particularly affects the ethnic minorities living in remote areas and that represent the large majority of Vietnam’s poor. In this regard, further research addressing consumption differences across ethnic groups in Vietnam would be useful.

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