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Executive Summary:

While both China and Vietnam have experienced rapid annual growth over the past two decades, income inequality has risen more rapidly in China than in Vietnam during the same period. Structural and socio-cultural determinants fail to account for these divergent paths, as nearly every variable predicts higher inequality in Vietnam. This paper by Regina Abrami and colleagues focuses on differences in political institutions to explain these divergent paths. In so doing, it contributes to a growing body of literature describing variation in authoritarian regimes, but focuses on variation within one authoritarian regime type. Key concepts include:

• Compared with China, Vietnam's institutions empower a larger group of insiders and place far more constraints on the party leadership, both through vertical checks and through semi-competitive elections. As a result, Vietnamese economic policies must consider a larger cross section of society.
• Vietnam spends a far larger portion of its revenue on transfers, and has been able to engender greater equalization among provinces and individuals.
• It is still too early to tell whether the development paths in China and Vietnam will converge or diverge.
• Growing income inequality has pressured the Chinese government to shift its focus from promoting all-out economic growth to solving social tensions.

Paper Information

• Full Working Paper Text
• Working Paper Publication Date: May 2008
• HBS Working Paper Number: 08-099