Decomposing Inclusive Growth: Application to Household Survey Data in Vietnam

Ray and Genicott (2023) proposed a new metric for upward mobility, which also captures the concept of inclusive growth. We proposed several decomposition analyses of this metric using household-level data, which can help identify the factors that contributed to the observed inclusive growth. We applied these methods to Vietnam, a country that experienced rapid and equitable economic growth. Our findings reveal that rural residents, who were initially left behind, experienced more inclusive growth than urban residents, contributing to overall national-level inclusive growth. The impact of household demographic factors such as education levels and job status was relatively minor in explaining inclusive growth in Vietnam. Instead, regional economic performance emerged as a key driver of inclusive growth. The limited impact of education improvement is likely because the poor tended to be low-educated elderly people who would not directly benefit from the improvement of education. These findings underscore the importance of economic growth and expansion of social security systems, such as old-age pension programs, to achieve inclusive growth.