This paper uses the Vietnamese Households Living Standards Surveys of 2002, 2004, 2006
and 2008 to examine the effects of nonfarm activity on poverty in rural Vietnam. We show
that nonfarm activity helps the poor, but not the poorest, given that households need to own a
minimum level of endowment to partake in nonfarm activity. We find an inverted-U shaped
relationship between households’ endowment levels and the probability of participating in
nonfarm activity. Also, in contrast to previous studies which largely by-passed the
endogeneity of nonfarm activity, we instrument it with nonfarm networks, and find that
nonfarm activity plays an important role in poverty reduction, however, this impact decreases
over time.