We examine the linkages between firm agglomeration and the welfare of
households in Vietnam. We measured firm agglomeration by per capita
firm output at the district level and household welfare by per capita
income, expenditure, and poverty. We find that firm agglomeration helps
households move from the informal sector to the formal sector. As a
result, there is a positive effect of firm agglomeration on per capita
income, per capita expenditure, and poverty reduction, albeit of a small
and time-decreasing magnitude. The effect of firm agglomeration on per
capita expenditure tends to be higher for households with men, younger,
and more educated heads than households with women, older, and less
educated heads. Households in rural areas and those that do not have
crop land are more likely to benefit from firm agglomeration than those
living in urban areas and having crop land.