Urbanization and poverty have a two - way relationship. Using fixed - effects regression and panel data from household surveys, we es timate the effect of urbanization on income and consumption expenditure of rural households in Vietnam. Then we propose a simple estimate method to estimate the effect of urbanization on rural poverty. It is found that a one percent increase in urbanizatio n leads to a 0.54 percent increase in per capita income and a 0.39 percent increase in per capita expenditure of rural households. In addition, a one percentage point increase in urbanization helps rural households decrease the poverty rate by 0. 17 percent age point. However, we find a n effect of urbanization on consumption of unhealthy goods : urbanization increases household expenditures on tobacco and wine.