Economic efficiency versus social equity: The productivity challenge for rice production in a ‘greying’ rural Vietnam

Increasing agricultural productivity is often deemed necessary to enhance rural income and ultimately narrow the urban–rural disparity in transitional economies. However, the objectives of social equity and economic efficiency can contradict each other, especially in the context of fierce competition for resources between agriculture and non-agricultural sectors and given the inherently and largely redundant and unskilled aging rural population that often occurs during the economic transition to a market economy. We investigate the case of Vietnam during its high growth period (2000–2016), over which the country introduced policies to increase efficiency in rice production and income for farmers. Contrary to expectations, we find a substantial fall in the terms of trade for rice, indicating a regression in farm income. This fall in the terms of trade did not enhance technical change, as seen in other countries, and only marginally improved technical efficiency in most regions. The reason stems from Vietnam's limited investment in scientific research and development and policies that restrict farmers’ decision-making power in production, among others. We further examine the causes of inefficiency using data from two household surveys in 2004 and 2014 (with plot-level information) and semi-structured interviews with farmers in 2016–2017. The high ratio of aging farmworkers who are unable to find alternative employment during the transition emerges as an essential impediment to increases in rice productivity, in addition to previously documented land-use-related issues. This demographic feature, along with government equity-targeting measures, hinders the farm amalgamation progress, further limiting efforts to enhance efficiency. Thus, the goals of economic efficiency and social equity do indeed appear to be contradictory features of Vietnam's rice policies, posing a significant development challenge for the country's current and likely future progress.