Trends and Drivers of Income Inequality in the Philippines, Thailand, and Viet Nam: A Decomposition Analysis

TRENDSANDDRIVERSOFINCOMEINEQUALITY INTHEPHILIPPINES,THAILAND, ANDVIETNAM ADECOMPOSITIONANALYSIS RogelioMercado,Cyn-YoungPark,andJuzhongZhuang NO.692 August2023 ADBECONOMICSWORKINGPAPERSERIES ASIANDEVELOPMENTBANK ADBEconomicsWorkingPaperSeries TrendsandDriversofIncomeInequalityinthePhilippines,Thailand,andVietNam:ADecompositionAnalysis RogelioMercado,Cyn-YoungPark,andJuzhongZhuang TheADBEconomicsWorkingPaperSeriespresentsresearchinprogresstoelicitcommentsandencouragedebateondevelopmentissuesinAsiaandthePacific.TheviewsexpressedarethoseoftheauthorsanddonotnecessarilyreflecttheviewsandpoliciesofADBor itsBoardofGovernorsorthegovernmentstheyrepresent. No.692|August2023 RogelioMercado(rogelio.mercado@seacen.org)isasenioreconomistattheSouthEastAsianCentral BanksResearchandTrainingCentre.JuzhongZhuang(jzhuang1984@outlook.com)isaconsultantand Cyn-YoungPark(cypark@adb.org)isthedirectoroftheRegionalCooperationandIntegration,andTradeDivision,ClimateChangeandSustainable DevelopmentDepartment,AsianDevelopmentBank. ASIANDEVELOPMENTBANK CreativeCommonsAttribution3.0IGOlicense(CCBY3.0IGO) ©2023AsianDevelopmentBank 6ADBAvenue,MandaluyongCity,1550MetroManila,PhilippinesTel+63286324444;Fax+63286362444 www.adb.org Somerightsreserved.Publishedin2023. ISSN2313-6537(print),2313-6545(electronic)PublicationStockNo.WPS230301-2 DOI:http://dx.doi.org/10.22617/WPS230301-2 TheviewsexpressedinthispublicationarethoseoftheauthorsanddonotnecessarilyreflecttheviewsandpoliciesoftheAsianDevelopmentBank(ADB)oritsBoardofGovernorsorthegovernmentstheyrepresent. ADBdoesnotguaranteetheaccuracyofthedataincludedinthispublicationandacceptsnoresponsibilityforanyconsequenceoftheiruse.ThementionofspecificcompaniesorproductsofmanufacturersdoesnotimplythattheyareendorsedorrecommendedbyADBinpreferencetoothersofasimilarnaturethatarenotmentioned. Bymakinganydesignationoforreferencetoaparticularterritoryorgeographicarea,orbyusingtheterm“country”inthispublication,ADBdoesnotintendtomakeanyjudgmentsastothelegalorotherstatusofanyterritoryorarea. ThispublicationisavailableundertheCreativeCommonsAttribution3.0IGOlicense(CCBY3.0IGO)https://creativecommons.org/licenses/by/3.0/igo/.Byusingthecontentofthispublication,youagreetobeboundbythetermsofthislicense.Forattribution,translations,adaptations,andpermissions,pleasereadtheprovisionsandtermsofuseathttps://www.adb.org/terms-use#openaccess. ThisCClicensedoesnotapplytonon-ADBcopyrightmaterialsinthispublication.Ifthematerialisattributedtoanothersource,pleasecontactthecopyrightownerorpublisherofthatsourceforpermissiontoreproduceit.ADBcannotbeheldliableforanyclaimsthatariseasaresultofyouruseofthematerial. Pleasecontactpubsmarketing@adb.orgifyouhavequestionsorcommentswithrespecttocontent,orifyouwishtoobtaincopyrightpermissionforyourintendedusethatdoesnotfallwithintheseterms,orforpermissiontousetheADBlogo. CorrigendatoADBpublicationsmaybefoundathttp://www.adb.org/publications/corrigenda.Notes: Inthispublication,“$”referstoUnitedStatesdollars. ADBrecognizes“China”asthePeople’sRepublicofChina,“USA”astheUnitedStates,and“Vietnam”asVietNam. ABSTRACT Overthepast2decades,incomeinequalityhasmoderatedinthreemiddle-incomecountriesinSoutheastAsia—thePhilippines,Thailand,andVietNam—withmultiplefactorsatplay.Ineachcountry,wage,nonfarmbusinessincome,andoverseasremittanceconcentrationsdeclinedaslesswell-offhouseholdsincreasinglyengagedinbetter-payingactivities.InThailand,privatetransfersbecamemorepro-poor,andinVietNam,publictransfersmoretargeted.Majorcontributorstolowerincomeinequalityalsoincludedanarrowinginregionaldisparityandurban–ruralincomegaps,and,inthePhilippinesandThailand,afallintheeducationpremium.Thisrecenttrendofmoderatingincomeinequalitymightbethecombinedoutcomeofrisingincomeopportunities,governmentpoliciespromotingsocialinclusion,andpositiveimpactsofstructuraltransformation.Nonetheless,incomeinequalityremainshigh,especiallyinthePhilippinesandThailand.Morepolicyeffortsarestillneededtomakegrowthmoreinclusive. Keywords:Incomeinequality,decomposition,SoutheastAsia JELcodes:D31,D63,I31,N15 TheauthorsarethankfultothenationalstatisticalagenciesofthePhilippines(PhilippineStatisticsAuthority),Thailand(NationalStatisticsOffice),andVietNam(GeneralStatisticsOffice)formakinghouseholdsurveydataavailable,andtoMaeAbigailOberos,RyanB.Jacildo,andPauloRodelioHaliliforexcellentresearchassistance.TheviewsexpressedinthispaperarethoseoftheauthorsanddonotnecessarilyreflecttheviewsandpoliciesoftheAsianDevelopmentBankandtheSouthEastAsianCentralBanks(SEACEN)ResearchandTrainingCentre. 1.Introduction Incomeandwealthinequalityhaveincreasedrapidlyaroundtheworldinthepastseveraldecades,attractingsignificantacademicandpolicyattention(ADB2007and2012;Piketty2014;RaniandFurrer2016;Zhuang2023).Yet,inSoutheastAsia,wherecountrieshaverapidlytransformedstructurally,theexperienceismixed.AccordingtoWorldBankdata,incomeinequalityhasrisensignificantlyinIndonesia,butdeclinedinMalaysia,thePhilippines,andThailandandremainedstableinVietNam—albeitatstillhighlevels(Tabl