Trade Openness and Household Welfare within a Country : A Micro Analysis of Vietnamese Households

The thought that trade liberalization can affect many dimensions of poverty initiates many studies of the relationship between trade liberalization and poverty. In fact, several developing countries’ successful development arguably counts on trade liberalization. This paper aims to find out the determinants of welfare of rural households in Vietnam, focusing on the impact of trade openness and institutional reform on rural household welfare at provincial level. The study employs a micro-growth model and tests it on the Vietnam Household Living Standards Surveys (VHLSS) 2006 and 2008. What makes the study different from some other studies of the same vein is that it incorporates some new variables from outside the VHLSS data, which are expected to capture the difference in openness to trade and investment among provinces. The main finding is that welfare of rural households in the provinces with strong institutional reforms and trade openness tends to be improved. Therefore, the primary implication is that Vietnam should accelerate the process of institutional reforms to help poor households improve their standards of living