Ageing,Poverty and the Role of a Social Pension in Vietnam

Using the Vietnam Household Living Standard Survey in 2004, this article seeks to quantify the potential role and impacts of a social pension scheme for reducing elderly poverty in Vietnam. The authors simulate changes in the poverty rate, poverty gap and poverty severity of the elderly in the counterfactual situation that such a scheme had been introduced to Vietnam in the past. They consider a number of categorical targeting groups of elderly people along with various transfer parameters to assess the impacts of the scheme on social welfare. They conclude that, depending on the characteristics of the social pension, there would be beneficial poverty reductions, but also large leakages to the non‐poor people. For a variety of measures, the results suggest that targeting the elderly in rural areas might be the most effective use of limited resources. Simulations for different budgetary constraints show that, even with limited budgeting, a social pension scheme would significantly reduce poverty incidence for the elderly. Furthermore, for a given programme cost, combining lower benefits with lower eligibility requirements is more effective at reducing poverty than providing larger benefits to a more limited group of recipients.