This study examines the heterogeneous and dynamic effects of income diversification on
Vietnamese household welfare measured by total income and consumption expenditure. Based
on a risk management perspective and prior studies, households with different income levels may
have different income diversification strategies. In the analysis, we use quantile regression for both
pooled and cross-sectional data across regions. The effects from Simpson’s diversity index, as the
measure of income diversification, show mixed results. During the early period of study, income
diversification raised the welfare of most households. However, the trend was reversed in the later
period. This generates concern for low-income households and their income sources are less
diversified. For higher-income households, the adverse effects are due to their focus on fewer
economic activities, with wage earnings being their main source of income.