Sources and Pro-Poorness of Thailand’s Economic Growth

Somchai Jitsuchon
JEL codes: 
Thammasat Economic Journal Vol. 24, No. 3, September 2006

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 (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.