The Rural Non-Farm Economy

Abstract In Viet Nam, the diversification of household activities away from agriculture is a key characteristic of the country’s economic development. This chapter examines the extent of diversification among Vietnamese households, from agriculture into waged employment and entrepreneurship, and looks at whether this diversification is welfare enhancing. It then examines the factors determining the transition out of agriculture. Using four waves of the VARHS panel data, it finds that diversification is, on average, welfare enhancing, and that the most beneficial form of diversification is into household enterprises. The decision to diversify is primarily motivated by income, especially for those from low-income households.