This paper examines the poverty and inequality pattern, income and characteristics of households in the Program 135-II communes – the poorest areas in Vietnam. The poverty incidence decreased from 57.5 percent to 49.2 percent during the period 2007-2012. Although the poverty incidence decreased, the poverty gap and severity indexes of households in the Program 135-II areas did not decrease during 2007-2012. The decomposition analysis shows that the reduction of the poverty incidence in the poorest communes was achieved by the income growth. The inequality increased, thereby slightly raising the poverty incidence. Poverty is sensitive to economic growth. However, the elasticity of poverty with respect to income growth tends to decrease overtime. It means that income redistribution plays a very important role in decreasing the poverty gap and poverty severity.
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