Market Reform, Incentives and Economic Development in Vietnamese Rice Production

Abstract

This paper analyses the dramatic increases in rice output and productivity in Vietnam due in large part to market reform, inducing farmers to work harder and use land more efficiently. The reform process is captured through changes in effort variables and a decomposition of total factor productivity (TFP) for Vietnam as a whole as well as for the north and south of the country taken separately. The results show that the more extensive the market reform the larger the increase in TFP and the share of TFP growth due to incentive effects, suggesting that more competitive markets and secure property rights matter greatly.