1 SUMMARY OF DISSERTATION ON THE ROLE OF HUMAN CAPITAL IN SUSTAINABLE POVERTY REDUCTION IN VIET NAM Subject: THE ROLE OF HUMAN CAPITAL IN SUSTAINABLE POVERTY REDUCTION IN VIET NAM Major: Labour Economics Code: 62340201 PhD. Candidate: Thai Phuc Thanh Supervisors: 1. Ass. Prof. Dr. Pham Thuy Huong 2. Ass. Prof. Dr. Nguyen Vinh Giang Peer reviewers: 1. Ass. Prof. Dr. Le Thanh Ha 2. Dr. Luu Bich Ngoc 3. Dr. Nguyen Manh Hai 2 FOREWORD Justification: Educated supporting and vocational training may improve human capital for the poor in terms of qualification and specialist knowledge. However, how the effectiveness of these programs is and what strategies can be applied to enhance human capital in the sustainable poverty reduction are the significantly practical and scientific questions that have not studied yet. Research objective: The overall objective of this dissertation is to assess the role of human capital in poverty reduction and to propose strategies aim at enhancing human capital in sustainable poverty reduction. Structure of this dissertation: Introduction Chapter 1: Theoretical issues about the role of human capital in sustainable poverty reduction; Chapter 2: Research methodology; Chapter 3: Situation of the role of human capital in the sustainable poverty reduction in Viet Nam for the period 2000-2010; Chapter 4: Solutions to enhance the role of human capital in sustainable poverty reduction to 2020; Conclusion The key results of the dissertation are summarized in the below chapters: 3 Chapter 1: Theoretical issues about the role of human capital in sustainable poverty reduction 1.1. Human capital Human capital comprises one’s knowledge, skills and ability gained over working and learning. Human capital is considered as a livelihood asset. Figure 1.1: The elements of human capital The important feature of human capital is that its elements are tightly connected and that are difficult to separate. It has individual characteristics but also community feature; internal and external effect; qualitative and quantitative ones. Human capital significantly suffer the impact of various factors including demography, culture and social, economic, infrastructure, natural environment, economic, policy, institution, education and family. In this dissertation, human capital is analyzed through two groups: the first group refers to the knowledge gained from formal education and the second group is specialist knowledge/experience and specific skills in terms of production, expenditure and risk mitigation and adaptation. The subjective and natural conditions Ability to apply learned knowledge into practice Skill Knowledge Ability Human capital Knowledge measured by qualification 4 1.2. Poverty, poverty reduction and sustainable poverty reduction Sustainable poverty reduction is a status that one can achieve the satisfactory level of basic human demands such as income, living standard and can maintain that level even when facing to risks or shocks. In other words, poverty reduction is either sustainable out of poverty or non- returning to poverty. Poverty and sustainable out of poverty is the outcomes of livelihood. Poverty reduction is assessed through the major criterias: (i) basic needs satisfaction, (ii) income improvement and maintenance; and (iii) escape from poverty and non-returning poverty. Figure 1.2: Criterias of sustainable poverty reduction Sustainable poverty reduction endures the impact of internal factors including livelihood capitals, livelihood activities and strategies and external factors comprising market, institution, policy, technology, poverty assistance, infrastructure and natural environment… 1.3. Position and relationship of human capital and poverty reduction in theory of livelihood Livelihood means one’s living method that involves the capitals and a set of essential activities to guarantee basic living standards. Sustainable poverty reduction Increase income and remain the income at high level Satisfy to basic needs Escape from poverty and non-returned poverty 5 Livelihood capital is human own materials or properties that can be used during their lifetime. It is relatively classified into five categories: human, financial, natural, physical and social capitals Livelihood activities are the combination of human capitals during one’s lifetime. Livelihood result is the output of livelihood activities which is measured through the change of livelihood capitals after a certain time. The external factors encompass natural environment, socio- economic, policies, institutions, markets, particularly risks, shocks and negative impacts Figure 1.4: The simple livelihood model 1.4. The role of human capital in sustainable poverty reduction “The role” is understood as a function and an impact. The theory is developed basing on the livelihood model. Human capital comprises knowledge and skills which are placed in the central of the model and are intimately connected with other livelihood capitals. It affects to sustainable poverty reduction through income, out of poverty status and non-returning to poverty. Two roles of human capital in the framework are below Liveliho od capital Human capital Natural capital Financial capital Physical capital Social capital Livelihood output Livelihood strategies External factors 6 1) The role of human capital in poverty reduction and non- returning the poverty The role of human capital in poverty reduction is considered as a role of livelihood capital. Its results (out of poverty and non-returning to poverty trap) is produced through the following mechanism: - Determine other livelihood capitals and directly affect to the satisfactory degree of human basic needs; - Determine household livelihood strategies; - Determine livelihood activities and approaches to integrate with other livelihood capitals in livelihood activities. - Determine adaptive capacity to external factors - Determine ability to apply new science and technology into livelihood activities in order to increase labor productivity; These impacts result in higher human capital, more efficient livelihood strategies, more effective livelihood activities, higher adaptive capacity and better livelihood capital. Indeed, the role of human capital in poverty reduction is only effective if it could adapt to realistic condition including other livelihood capitals and external impacts. 2) The role of human capital in term of impact on the income Human capital influences household income through different mechanisms. The most essential effect is increase labor productivity. It also impacts on the income through labor environment, meaning higher quality labor working in higher income sector. In addition, human capital affects to household size and dependent rate which consequently impact on average income of a household. People earning high income do frequently give less birth. 7 Figure1.5: Research model Chapter 2: Research methodology 2.1 Approaches and analysis methods 1) Approach: The situation of the role of human in poverty reduction is analysed based on three essential roles and 5 basic relationships as follow: EXTERNAL FACTORS: Risks and shocks Sustainable poverty reduction: - Increase income - Out of poverty and non-returning to poverty - Degree of basic need satisfaction HUMAN CAPITALS: - Official education: Knowledge and qualification - Experience and skills: + Experinence and skills regarding to production: understanding of production, science and technology and how to carry out activities + Financial management skills: capital management, expenditure plan + Capacity to cope with risks and shocks OTHER LIVELIHOOD CAPITALS - Financial capital - Physical capital - Natural capital - Social capital 8 Role Relationships Specific relationship Methodology, data and tools 1. Role of human capital over the income 1. Relationship between education, specialist knowledge and income - The qualification of head of a family and their income. - Labors‘ qualification and working environment - the qualification of the head of family and the dependent rate - Labor’s qualification and employment sectors Method: quantitative analysis Data: VHLSS 2004, 2006, 2008, 2010. Tools: STATA and Mincer model 2. Experience, skills and income - production experience, skills and income - Expenditure management skill and income - Experience and skills to cope with risk and income Method: quantitative analysis Source of data: + Secondary studies and reports + Primary data: houshold survey Tool: STATA 2. Role of human capital in sustainable poverty reduction 3. Relationship between education,speciali st knowledge and sustainable poverty reduction - Education level and poverty rate - Education level and degree of poverty Method: quantitative analysis Source of data: + Household survey + VHLSS 2010 và 2012 Tool: STATA, education impact assessment model and household poverty reduction 4. Experience and skills of sustainable poverty reduction - Experience and skills of production and poverty status - Experience and skills of financial management and poverty status - Experience and skills to cope with risk and poverty status Method: quantitative analysis Source of data: Household survey Tool: STATA 3. Role of human capital in basic demand satisfaction 5. Education level and livelihood capitals Education level and other soical indexes: type of house, water supply, toilet, mean of transportation and communication Method: quantitative analysis Source of data: Household survey Tool: STATA 9 2) Methodology and Model Descriptive analysis is applied to analyse the relationship between education level and income; experience, skills and income; education level and sustainable poverty reduction; experience, skill and sustainable poverty alleviation. Mincer model: the equation ln = a0 + a1S + a2t + a3t2 + other variables is applied to analyse the relationship between qualification and wage of paid labour or income of sefl agricultural and non-agriculture labour, where: Yt is the gross income of a year t; S is the number of school years; t is the number of potential experience gained year; t2 is the square of potential experience year; ao is the coefficient; a1 is the estimated value of the benefit of official education; a2 is the added percentage value of income along with increase year of experience; a3 is the value of decrease in marginal income according to year of working experience Probit Impact assessment model of the relationship between education level and poverty reduction of a household is developed and applied to analyse the relationship between education level, specialist knowledge and sustainable escape from poverty. The hypothesis is that Y equivalent 1 if household is poor; and equivalent 0 if household is non- poor. Depending on the feature I of household which is defined by independent variables, the probability of Y=1 would be low or high or the probability that a household fall into poverty would be low or high. Supposingly, the feature I of a household is defined as follow: I = β 1 +β 2 X 2i (where X 2i is an independent variable). Hence Y=1 if I < I* (the limitation level) and Y=0 if I> I*. Due to the fact that I could not be observed, it is hypothesised that I* = I + u (where u is a random factor of the model), then Ii* = β 1 + β 2 X 2i + u i. 2.2. Source of data 1) Primary data Household survey: a survey of 270 households classified into three 10 categories: chronic poor, returned poor and sustainable out of poor. The sample of each group is 90. The survey is conducted in 6 provinces including Yen Bai, Ha Noi, Nghe An, Kon Tum, Quang Nam and Tra Vinh. Sample is randomly selected from the given list of communes. In addition, 25 deep household interviews, 20 case studies and 4 group discussions with officers, representatives of those were out of poverty and those returned to poverty circle were implemented. 2) Secondary data Vietnam Household Living Standards Survey in 2002, 2004, 2006, 2008 and 2012 is conducted by General Statistics Office. The main survey sample is 45,000 households in 3,000 communes and a sub-survey sample is 9,000 household applied for the module of household expenditure. The household size, the information and the quality of the survey can adapt to the research objectives in terms of income, employment status, education and training, house and property etc. Other secondary sources of data includes relative reports, statistics and studies Chapter 3: Situation of the Role of Human Capital in Sustainable Poverty Reduction in Vietnam for the period of 2000 to 2010 3.1. Poverty situation and poverty reduction in Vietnam 2000 – 2010 The poverty rate decreased dramatically from 37% in 1998 to 12% in 2010. However, rate of people falling back into poverty remains high by 30% compared to the rate of people out of poverty and. The rate of people in chronic poverty is also high, accounting for 9% of households. Significantly, 90% of poor households usually lives in rural areas. Those people are frequently affected by several risks. Almost 50% of the rural households face risks, especially natural disasters. In addition, the living assets of poor households including house, land, savings, income, [...]... consisting of 41,2% and 43,2% of the same order There is a large disparity risk reduction knowledge and skills between sustainable poverty reduction group and falling back to poverty group as well as chronic poverty group : According to the 18 survey finding, 87.2% households of the sustainable poverty reduction group gains good knowledge and skills in terms of risk management; that rate of falling back... enhancing the role of human capital in SPR 1) Change in the approach of poverty reduction Based on the basic concepts of this thesis, poverty is indeed a 21 multi-dimensional issue because human beings basic needs are quite diverse However, poverty in Vietnam has been assessed as a single dimension through income only Meanwhile income itself could not fully cover the multi-aspects of basic needs Single... reduction and human capital improvement for the poor in the coming years 4.2 Points of view on enhancing the role of human capital in sustainable poverty reduction within the poverty reduction framework Firstly, In order to improve human capital for the poor, it is crucial to provide them not only the support on general knowledge but also enhance specific knowledge and skills Secondly, in order to take... general, human capital contributes significantly to SPR through its function and impact on income, satisfaction level of basic need, increasing chance of getting out of poverty and no risk of falling back into poverty for the households in Vietnam in the last ten years The general trend between human capital and poverty reduction is positive The higher human capital a householder has, the higher income,... advantage of human capital to eliminate poverty, knowledge and skill provided for the poor should satisfy their practical living and production requirements This also means that supporting production in poverty reduction should be adapt to the situation of the poor human capital Finally, the poor should be fully aware of their own responsibilities in improving their human capital and fighting against poverty. .. higher of knowledge and experience concerning disaster is the lower loss of income due to disaster will be 3.3 Role of human capital in sustainable poverty reduction 1) Role of professional and technical educational level in sustainable poverty reduction Basically, statistical analysis point out that there is a negative correlation between professional and technical educational level and poverty reduction, ... 2.9% The relative coefficient of the number of schooling year and poverty is -0.016 It means every schooling year increases, the poverty risk of a household is likely to go down by 1.6% or the probability of poverty elimination of that household goes up to 1.6% Coefficient of interactive variables – Schooling year * SelfAgr is equal to 0.004, meaning the impact of a schooling year of the selfAgri on the. .. suitable to the poor’s conditions Specific solutions to improve the human capital for the poor as below: 1) Providing educational support to the poor in order to increase their educational level; 2) Providing vocational training for the poor laborers and supporting job opportunity for them after the training; 3) Providing systematically training on income generating, financial management and risk coping which... (MOLISA) play a key role in coordination the implementation of strategies over enhancing human capital for the poor In addition, multi-dimension approach to access poverty should be applied The coordination between supporting for poverty reduction and specific strategies should be implemented to create an appropriate condition to enhance the role of human capital in sustainable poverty reduction Significantly,... falling back into poverty 3.2 Role of human capital in household income 1) The role of general education and professional knowledge over income Statistical analysis shows a clear correlation between households‘ educational and professional level and their average incomes, the higher level of education, the higher income could gain The figure 3.2 give a clear relationship of how education impact on income . 1 SUMMARY OF DISSERTATION ON THE ROLE OF HUMAN CAPITAL IN SUSTAINABLE POVERTY REDUCTION IN VIET NAM Subject: THE ROLE OF HUMAN CAPITAL IN SUSTAINABLE POVERTY REDUCTION IN VIET NAM Major:. Situation of the Role of Human Capital in Sustainable Poverty Reduction in Vietnam for the period of 2000 to 2010 3.1. Poverty situation and poverty reduction in Vietnam 2000 – 2010 The poverty. between sustainable poverty reduction group and falling back to poverty group as well as chronic poverty group : According to the 19 survey finding, 87.2% households of the sustainable poverty reduction