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

ASIAN DEVELOPMENT BANKASIAN DEVELOPMENT BANK6 ADB Avenue, Mandaluyong City1550 Metro Manila, Philippineswww.adb.orgADB ECONOMICSWORKING PAPER SERIESNO. 692August 2023Trends and Drivers of Income Inequality in the Philippines, Thailand, and Viet NamA Decomposition Analysis Income inequality has moderated in the Philippines, Thailand, and Viet Nam over the past 2 decades. This paper examines the factors that drove the moderation by decomposing income inequality and its changes by income sources and household characteristics. Wage, nonfarm business income, and overseas remittance concentrations declined as less well-off households increasingly engaged in better-paying activities. Moderating income inequality might be the combined outcome of rising income opportunities, government policies promoting social inclusion, and positive impacts of structural transformation. Nonetheless, income inequality remains high, especially in the Philippines and Thailand. More policy efforts are still needed to make growth more inclusive. About the Asian Development BankADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members —49 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance.TRENDS AND DRIVERS OF INCOME INEQUALITY IN THE PHILIPPINES, THAILAND, AND VIET NAMA DECOMPOSITION ANALYSISRogelio Mercado, Cyn-Young Park, and Juzhong Zhuang ASIAN DEVELOPMENT BANKThe ADB Economics Working Paper Series presents research in progress to elicit comments and encourage debate on development issues in Asia and the Pacific. The views expressed are those of the authors and do not necessarily reflect the views and policies of ADB or its Board of Governors or the governments they represent.ADB Economics Working Paper SeriesRogelio Mercado, Cyn-Young Park, and Juzhong ZhuangNo. 692 | August 2023Rogelio Mercado (rogelio.mercado@seacen.org) is a senior economist at the South East Asian Central Banks Research and Training Centre. Juzhong Zhuang ( jzhuang1984@outlook.com) is a consultant and Cyn-Young Park (cypark@adb.org) is the director of the Regional Cooperation and Integration, and Trade Division, Climate Change and Sustainable Development Department, Asian Development Bank.Trends and Drivers of Income Inequality in the Philippines, Thailand, and Viet Nam: A Decomposition Analysis Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO)© 2023 Asian Development Bank6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, PhilippinesTel +63 2 8632 4444; Fax +63 2 8636 2444www.adb.orgSome rights reserved. Published in 2023.ISSN 2313-6537 (print), 2313-6545 (electronic)Publication Stock No. WPS230301-2DOI: http://dx.doi.org/10.22617/WPS230301-2The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned.By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this publication, ADB does not intend to make any judgments as to the legal or other status of any territory or area.This publication is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) https://creativecommons.org/licenses/by/3.0/igo/. By using the content of this publication, you agree to be bound by the terms of this license. For attribution, translations, adaptations, and permissions, please read the provisions and terms of use at https://www.adb.org/terms-use#openaccess.This CC license does not apply to non-ADB copyright materials in this publication. If the material is attributed to another source, please contact the copyright owner or publisher of that source for permission to reproduce it. ADB cannot be held liable for any claims that arise as a result of your use of the material.Please contact pubsmarketing@adb.org if you have questions or comments with respect to content, or if you wish to obtain copyright permission for your intended use that does not fall within these terms, or for permission to use the ADB logo.Corrigenda to ADB publications may be found at http://www.adb.org/publications/corrigenda.Notes: In this publication, “$” refers to United States dollars. ADB recognizes “China” as the People’s Republic of China, “USA” as the United States, and “Vietnam” as Viet Nam. ABSTRACT Over the past 2 decades, income inequality has