Viet Nam's Rice Land Restrictions Carry a Productivity Cost — and No Rice Gain

1 day ago
2 min read

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Huy Quynh Nguyen — Senior Research Associate

Viet Nam still requires large areas of land to be planted with rice, and new evidence indicates that this crop choice restriction lowers farm productivity and household incomes. The study also finds that rice output would not have fallen had the restrictions been lifted.

Context

Viet Nam's 1986 programme of market-oriented economic reforms transformed much of the country's agriculture, but it stopped short of letting farmers choose their crops freely. Decades later, large areas of land remain restricted to rice production — a policy instrument long associated with national food security objectives.

That leaves an open policy question. If restricted land could earn more under other crops, the restrictions impose a cost on the farm households that hold it. Whether that cost is offset by the rice the policy secures is an empirical matter, and one that requires household-level data to answer.

*How the restriction becomes lost income*

Methods

The paper uses panel data from the Viet Nam Access to Resources Household Survey (VARHS) covering 2008 to 2016. The econometric analysis applies fixed effects methods, both on their own and combined with instrumental variable methods, so that the possible statistical endogeneity of the restrictions — the concern that restricted land differs systematically from unrestricted land — can be taken into account.

Key findings

The crop choice restrictions reduced the overall productivity of annual crop land by about 5%.
The restrictions reduced the overall productivity of farm labour by about 8%.
Mean incomes of farm households fell by 5%–6%, implying increased levels of rural poverty.
Rice output would have been no lower if the restrictions had been removed — the productivity and income costs are not buying additional rice.