Household Welfare and Pricing of Rice: Does Being the World’s Biggest Rice Exporter Matter for Vietnam?

Since 2006, Viet Nam’s rice exports have soared, and in 2011 the country surpassed Thailand to become the world’s largest rice exporter. Even though one would expect higher rice exports to directly benefit rural households at all levels of well-being, most rice producers in Viet Nam are still poor, living on less than USD 2 per day. The government’s efforts to ensure a minimum rate of return for farmers by imposing price floors (minimum prices) have not been successful, as there is no enforcement mechanism in place. This study examines the potential impact on household welfare in Viet Nam of value chain upgrading in rice production through the Large-Scale Field Model. The possible effects of the adoption of such a model are: (a) an increase in the farm gate price of rice, (b) an increase in the productivity of rice farmers, and (c) a reduction in farmers’ production costs. The study shows how these changes would affect household welfare, taking into account the ripple effect that a change in the farm gate price of rice would have on other prices in the economy, and hence on household consumption, production, and wage income. The policy simulations in this study assume that farmers do not pass on any cost reductions and productivity improvements to the price of paddy. The results suggest that the implementation of the Large-Scale Field Model in the Mekong River Delta would increase the welfare of households by 4.1 per cent in the short term and 4.9 per cent in the longer term, and reduce poverty rates by approximately 0.55 per cent among the 10 per cent poorest households and by 0.42 per cent among the 20 per cent poorest households in that region.