his paper studies the causes of income inequality in Vietnam, witha particular focus on the role of spatial factors. A novel regression-based inequality decomposition is described, in which income (or ex-penditures) is regressed on household assets and characteristics and geographic dummies. The estimates of the income equation are sub-sequently used to decompose income inequality. This results in fac-tor inequality weights, defined as cov(Aßnxn, y)/s2(y), that are basedon economically meaningful income generating variables in accordancewith standard human capital theory.Using household survey data from Vietnam from the 1990s, spa-tial factors are found to account for a very substantial share of total inequality, even after controlling for household assets and character-istics. Higher education is also important for inequality, while landand other assets matter little. Growing inequality over time appearsto be caused by rising spatial inequality as well as higher returns tohigher education and white collar occupations. It is concluded thatspatial factors are more, and assets less, important for inequality thanoften posited in theoretical inequality research. Policy should strive tocreate the conditions for more equal returns to location. JEL Code:O15.