Sources and Pro-Poorness of Thailand's Economic Growth

Looking back around half a century, Thailand has been one of the fastest growing economies in the world. lt also possesses an impressive record in term of poverfy reduction' Whether the two phenomena are related and, if so, how, are of great interest to academic and policymakers. This paper attempts to shed some light on this issue, by first trying to provide descriptive explanation of what caused economic growth in the past 50 years, separated into five sub-periods, and then quantirativeiy calculates how much growth contributed to the reducfron of poverty since 1986. We argue that the impressive growth rates could be attributed to the country's high and rising openness. sound macroeconomic management emphasizing stability in both fiscal and monetary policies, promotion of market meehanism and private sector' strcngthening of key public policy agencies, and appropriate.mix of quantity and quality of human resources. There were some disruptions in the growth process, most notably during late 1970s up to early 1980s, and the 1997 hnancial crisis. The disruptions were caused both by cxternal factors, such as world recessions, effective appreciation of local culrency under fixed exchange rate, and by domestic factors such as failure to timely adjust exchange rate system, lack of good goverrance in both public policy and private businesses. The second part of the paper is the analysis of pro-poorness of overall economic growth and the irnportance of incolne sources in reducing poverty. Applying Kakwani et.al (2004),s methodology to Thai household data during 1986-2002, it is found that, before the crisis, economic growth helped poor more than proportionately since around 1992, when compared to the succeeding period of 1986-1992. After the crisis, the growth was unfavorable to the Thai poor only in 1999. Using household survey in 2000, the poverty elasticify is calculated at-1.206, meaning that for every I percent increase in average per capita income, poverty would reduce by l'206 percent' As for the importance of income sourccs in poverty reduction, the poverty elasticity indicates in-kind income, while the poverty reform index indicates rural non-form income and urban salary and farm-income as the most important income components in poverty reduction.Thailand, economic growth, poverty reduction

Thailand's Growth Rebalancing

This paper reviews Thailand's structural changes, the 1997 crisis experience, and recovery and lessons from the crisis. The paper then discusses the impacts of the subprime crisis on the Thai economy and the policy responses to date. The paper ends by discussing strategies to rebalance growth by reducing the dependence on exports as the main growth engine. The recovery from the 1997 crisis left Thailand more dependent than ever on exports as the main engine of growth, with the ratio of exports to gross domestic product (GDP) increasing from a precrisis level of about 38% to about 65% recently. The lessons learned from the 1997 crisis led to a more risk-averse financial system, and this helped Thailand avoid the direct impacts of the subprime crisis. However, being highly dependent on exports, Thailand, along with other export oriented East Asian economies, is now heavily affected by the indirect impacts of the subprime crisis, especially in the export industries. Exports and GDP have dropped sharply over the past two quarters. The government has been using fiscal stimulus and monetary easing measures to try to improve the economy. These measures are mostly short-term in nature, and if the subprime crisis is protracted, then the sustainability of the fiscal stimulus will be called into question. In the medium- to long-term, Thailand needs to move to a more balanced growth path, depending less on exports (although exports will still be important) and more on other, domestic sources of growth. The paper concludes by discussing a number of policy strategies that will contribute to a more balanced growth path.thailand growth rebalancing; exports; trade statistics; financial crises

The importance of public investment for reducing rural poverty in middle-income countries

This study estimates the impacts of different types of government expenditure on agricultural growth and rural poverty in Thailand. The results show that, despite Thailand's middle-income status, public investments in agricultural R&D, irrigation, rural education, and infrastructure (including roads and electricity), still have positive marginal impacts on agricultural productivity growth and rural poverty reduction. Additional government spending on agricultural research and development improves agricultural productivity the most and has the second largest impact on rural poverty reduction. Investments in rural electrification reduce poverty the most and have the second largest growth impact. These two investments dominate all others and are win-win for growth and poverty reduction. Road expenditure has the third largest impact on rural poverty reduction, but only a modest and statistically insignificant impact on agricultural productivity. Government spending on rural education has only the fourth largest impact on poverty, but a significant economic impact through improved agricultural productivity. Irrigation investment has the smallest impact on both rural poverty reduction and productivity growth in agriculture. Additional investments in the Northeast region contribute more to reducing poverty than investments in other regions. This is because most of the poor are now concentrated in the Northeast and it has suffered from under investment in the past. The poverty reducing impacts of infrastructure investments, such as electricity and roads, are particularly high in this region. The growth impacts of many investments are also greatest in the Northeast than in other regions, hence there is no evident tradeoff between investments for growth and investments for poverty reduction. Thailand is a middle-income country and it is insightful to compare these results with similar studies undertaken in low-income countries like India, China, and Uganda. Some of the results are similar, for example, the high returns to public investments in agricultural research and some kinds of rural infrastructure arise in most countries because of the inherent market failures associated with these types of public goods. But others results are different. For example, the returns to public investment in education in Thailand are quite low, partly because of increasing private investment but also the inappropriate composition of much public spending on education. Within infrastructure, results from low-income countries often show higher returns to road investments than telecommunications and electricity. But in the case of Thailand, it is investment in electricity that shows the highest return. Thailand has invested heavily in rural roads and a dense road network has already been built, suggesting that additional investment may yield diminishing returns. Also, there has been significant investment by the private sector in rural telecommunication, leading to a much-reduced role for the public sector. This situation differs from many low-income countries, especially in Africa, where the private sector is still embryonic and the public sector must play a dominant investment role for the foreseeable future.

Monitoring Development Sustainability through Sustainable Community Indicators

The Sustainable Development Goals (SDGs) is both a continuation to the Millennium Development Goals (MDGs) and an improvement on the addition of ‘means of implementation’ to achieve the goals. The SDGs recognize that countries should have their own ways to achieve development goals. In this regard, Thailand, through its ‘sufficiency economy philosophy’ (SEP) invented by the late King Bhumibol Adulyadej, has created a unique path to attain sustainable development. The SEP path involves (a) shaping personal attitudes and behaviors towards sufficiency and (b) setting procedures or protocols for development projects and programmes. In this paper, we developed a system of indicators that capture the first component—personal attitudes and behaviors—of the sufficiency economy philosophy practiced by Thai people, as well as a set of ultimate development outcome indicators, using data from nation-wide household and community surveys. We then analyze how practicing the sufficiency economy philosophy is associated with development outcomes, where we find positive correlation between the two groups of indicators

Three applications of market incompleteness and market imperfection

This thesis presents two applications of the incompleteness and one application of the imperfection of the market economy. The first application, Chapter 2, studies the decision making problem of an individual seeking to accumulate an optimal amount of human capital realizing that the wage income derived from the accumulated human capital is subject to incompletely insured uncertainty. In other words, the financial market that insures against wage income risk is not fully functional. We find that the individual's inability to diversify wage income risk tends to increase the need to accumulate more human capital in order to elevate wage path and compensate for the burden of its associated risk. This is particularly true when (i) the wage income risk is positively correlated with the rate-of-return risk in the financial market, resulting in an even greater risk burden to the individual, and (ii) the individual is more risk averse. There are two possibilities that no human capital is needed. The first possibility occurs when it is optimal to work as an unskilled worker because both the burden from wage income risk and the rate of return from education are low. The second possibility is the case where the risk burden is so high that the optimal time spent in school to acquire sufficient human capital to cover the risk is so long that the discounted rate of return from education is negative. In this case, the best strategy is to invest in financial assets alone and forfeit the opportunity to earn wage income - either as an educated or as an unskilled worker - to avoid its associated risk. Chapter 3 applies equilibrium unemployment theory with a frictional labor market to study the impact of immigration on the local labor market. Markets are imperfect in the sense that job matching takes time and recruitment is costly. We find that labor market outcomes of both the natives and existing immigrants depend crucially on how the economic surplus from successful matching is divided between the firms and the workers or, in other words, on the bargaining power of the workers. An arrival of immigrants with low bargaining power tends to benefit both the natives and the existing immigrants. A disparity between the two worker types in the matching efficiency also plays a major role. An inferior matching technology among the immigrants, interpreted here as reflecting their less established social network, lowers their wage rate and increases their unemployment rate. The natives are more likely to benefit from additional immigration than the existing immigrants and, when they do, the overall benefit can be decomposed into "job creation spillover" effect resulting from the immigrants' low bargaining power, and "job stealing" effect resulting from the immigrants' less efficient matching. The implications on the pattern of international migration flows are also discussed. In Chapter 4, a simple macroeconomic model is constructed and applied quantitatively to OECD countries, to analyze the effect of incomplete insurance on saving, growth and welfare in a closed economy. In this economy, precautionary saving motivated by uninsured idiosyncratic shocks raises growth rates but lowers risk-free returns. Welfare is measured by the sum of growth rates and risk-free rates of return, not growth rates alone. This welfare measure takes the negative impact of precautionary saving into consideration. Applied to the OECD data, three major results emerge: (i) the heterogeneous performance of growth and saving across the countries reflects different degrees of insurance incompleteness, (ii) since the externality of growth on productivity was very strong in the 1960's, the heavily constrained insurance market itself improves productivity by promoting growth, thereby enhancing welfare, (iii) while the externality of growth became weaker in the 1980's, the development of insurance markets lowered growth, but still contributed to a raise in welfare.Arts, Faculty ofVancouver School of EconomicsGraduat

Sources and Pro-Poorness of Thailand's Economic Growth

Looking back around half a century, Thailand has been one of the fastest growing economies in the world. lt also possesses an impressive record in term of poverfy reduction' Whether the two phenomena are related and, if so, how, are of great interest to academic and policymakers. This paper attempts to shed some light on this issue, by first trying to provide descriptive explanation of what caused economic growth in the past 50 years, separated into five sub-periods, and then quantirativeiy calculates how much growth contributed to the reducfron of poverty since 1986. We argue that the impressive growth rates could be attributed to the country's high and rising openness. sound macroeconomic management emphasizing stability in both fiscal and monetary policies, promotion of market meehanism and private sector' strcngthening of key public policy agencies, and appropriate.mix of quantity and quality of human resources. There were some disruptions in the growth process, most notably during late 1970s up to early 1980s, and the 1997 hnancial crisis. The disruptions were caused both by cxternal factors, such as world recessions, effective appreciation of local culrency under fixed exchange rate, and by domestic factors such as failure to timely adjust exchange rate system, lack of good goverrance in both public policy and private businesses. The second part of the paper is the analysis of pro-poorness of overall economic growth and the irnportance of incolne sources in reducing poverty. Applying Kakwani et.al (2004),s methodology to Thai household data during 1986-2002, it is found that, before the crisis, economic growth helped poor more than proportionately since around 1992, when compared to the succeeding period of 1986-1992. After the crisis, the growth was unfavorable to the Thai poor only in 1999. Using household survey in 2000, the poverty elasticify is calculated at-1.206, meaning that for every I percent increase in average per capita income, poverty would reduce by l'206 percent' As for the importance of income sourccs in poverty reduction, the poverty elasticity indicates in-kind income, while the poverty reform index indicates rural non-form income and urban salary and farm-income as the most important income components in poverty reduction.Thailand, economic growth, poverty reduction