Natural resource extraction and ethnic inequality in Dak Lak, Vietnam

Abstract

Natural resource extraction is an important livelihood strategy for poor rural households in developing and emerging countries. Despite the sharp decline in poverty in Vietnam, inequality still exists between the ethnic majority and minority. This paper aims to analyze the impact of natural resource extraction on ethnic inequality. We use panel data from Dak Lak in the Central Highlands of Vietnam. The Oaxaca-Blinder decomposition shows that ethnic differences in extraction are due to different group characteristics and different returns to these characteristics. Endogenous switching regressions find that extraction has heterogeneous effects on consumption across extracting and non-extracting households, and between majority and minority households. Treatment effects suggest that extraction sustains the consumption of extracting minority households because their consumption would decline if they stopped extracting. Our results indicate that it is important to improve the natural resource base and the ability of minorities to cope with shocks.