Countries with lower quality institutions or heavier burden of regulation are associated with a larger informal sector. In addition, other studies show that low startup costs are a key determinant in entering the informal economy. The paper investigates the linkage between the informal economy and poverty reduction based on the 2010 Vietnam Household Living Standard Surveys. Among low income households, those with members involved in informal economic activities have a higher per capita income than those with no members in the informal economy, and informal wage workers earn more than informal self-employed workers on average. Meanwhile, among non-poor households an inverse trend is observed
