Industrial protection and income distribution in Thailand
Date
1993
Authors
Sarntisart, Isra
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Abstract
During the past three decades, economic growth in Thailand has been
marked by the growing dominance of the manufacturing sector. The share of
manufacturing in GDP and in total exports has increased markedly. At the
same time, there has been a sluggish increase in the share of manufacturing
employment in the total labour force. Consequently, the gap between output
per worker in agriculture and the manufacturing sector has widened.
Concurrently, the distribution of income in Thailand has become more
unequal.
The role of industrial protection in industrial development is wellknown.
Many studies have estimated the degree of industrial protection in
Thailand during the past three decades. Many have also attempted to
establish the impact of a move from an import substitution regime towards
an export promotion regime. However, no previous studies have examined
the impact of trade liberalisation on income distribution, which is very
important in policy decisions.
Based on a computable general equilibrium (CGE) model, this thesis
attempts to answer the question: ’What would be the income distribution
impact of a move from the 1987 system of industrial protection towards free
trade?’ The answer to this question contributes to empirical knowledge in the
area of protection and income distribution in Thailand.
This thesis also offers methodologies to estimate the size distribution
of income, and to incorporate income distribution into a general equilibrium
framework. The methodologies enhance the analysis of poverty incidence, as
well as income inequality. The methodologies are applied to analyse the
income distribution impact of a move from the 1987 system of industrial protection towards free trade, at the national, community, and regional
levels.
As part of the database construction, the thesis also constructs a Social
Accounting Matrix (SAM) for Thailand, and estimates a system of consumer
demand. SAM provides some important information for the CGE model,
such as production technology and a factor ownership matrix. The estimation
of consumer demand consists of demand for ten commodities by ten types of
households, enriched by price information. This is the most detailed
estimation of consumer demand everdone for the Thai economy.
Results from simulations using the CGE model confirm the argument
in support of free trade. They show that while the move towards free trade
would lead to a more equal distribution of income, it would also lead to a
government budget deficit. The government might choose to borrow or raise
more revenue, through an across the board increase in indirect tax rates or
direct tax rates, to finance its budget deficit. The decision of the government
has important consequences for income distribution.
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Thesis (PhD)
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