Economic Growth in Thailand: The Macroeconomic Context

Introduction

Thailand has long been included with a group of economies in East and Southeast Asia, who, because of their outstanding growth performance, have been at the center of the research and discussion of the determinants of economic growth. Much of the debate has revolved around an effort to partition growth between the contributions of increased factor inputs (extensive growth) and improvements in the efficiency with which those factors are employed (intensive growth). This issue is important to resolving questions of the future sustainability of the growth process, and the direction that should be taken by government policies. How important are efforts to stimulate innovation and competition, which are believed to be linked to gains in the efficiency of resource use, versus expansion of educational opportunities and incentives for greater capital formation.

A concern with these issues has stimulated a large body of economic research aimed at identifying the proximate sources of growth, in both Thailand and other economies of the region. This research has included studies that use an econometric approach of estimating the parameters of an aggregate production function and those that rely on growth accounting to decompose the growth in output into the contributions of increased quantities of the factor inputs and a residual measure of improvements in total factor productivity (TFP). Both of these methodologies have been applied to Thailand's situation, but one consequence has been a wide variation in the conclusions of the individual studies.

The purpose of this paper is to review some of the major productivity studies of Thailand and attempt to identify the sources of their differences. The chapter also includes the construction of a set of growth accounts at the level of the total economy and three major sectors – agriculture, industry and services. These growth accounts provide the framework for a discussion of the data issues that arise in the context of efforts to measure Thailand's productivity performance.