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Abstract

Using panel data from Vietnam, this paper estimates the determinants of consumption growth for the period 2002-04, using a microgrowth model. While controlling for individual heterogeneity, particular attention is devoted to the question of whether geography, broadly defined to include natural and man-made characteristics at the level of the commune, can be responsible for lower growth rates and, consequently, poverty persistence. We find very limited support for this hypothesis. Neither public nor private investment at commune levels seem to have, per se, a significant effect on growth. However, local poverty rate does have an important, nonlinear, relation with growth rate of consumption at individual level, suggesting the importance of local externalities in this process. The policy implications of this finding are discussed.

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