Urbanization and poverty have a two-way relationship. Using fixed-effects regression and
panel data from household surveys, we estimate the effect of urbanization on welfare and
poverty of rural households in Vietnam. We find that urbanization tends to increase
landlessness of rural households and to reduce their farm income. However, urbanization
helps rural households increase their wages and non-farm incomes. As a result, total
income and consumption expenditure of rural households tend to be increased with
urbanization. Then we find that urbanization also helps rural households decrease the
expenditure poverty rate, albeit at a small magnitude.