Simulations of Policy Responses and Interventions to Promote Inclusive Adaptation to and Recovery from the COVID-19 Crisis in Vietnam

This paper investigates the impact of the COVID-19 pandemic on income, poverty and inequality in Vietnam. We use the Vietnam Household Living Standards Survey 2018 in combination with the Labor Force Surveys for 2018, 2019 and 2020 to simulate the impact of COVID-19 shocks in 2020. We use the difference-in-differences method, which is used little in the COVID-19 literature, to document that the income of workers in the production, construction, trade, transport, restaurant and hotel, real estate, support services, education and recreation sectors was heavily affected, especially in the fourth quarter of 2020. The simulation results show that per capita expenditures decrease in all eight regions, however the poverty rate or number of poor people increases only in the Southeast and Mekong River Delta regions. The poverty rate increases more in the urban area than in the rural area. In contrast, the number of poor households increases more in the rural area than in the urban area. Overall, the COVID-19 pandemic’s effect on the poverty rate is very small and therefore does not affect inequality much.