Recent Decrease of Regional Disparity within Thailand

Abstract

The existence of wage gaps between Thailand and its neighboring countries facilitate the division of labor in manufacturing production in the GMS. However, if the wage gap inside Thailand is too large, such effect is diminished. Under such recognition, this paper aims to clarify the recent situation of the regional disparity in Thailand.

The author acquired three findings. Firstly, the regional GINI coefficient in Thailand is confirmed to match Kuznets’ inverted U-shaped curve. The analysis shows that the peak of the disparity occurred with income level in the early to mid-1990s. Secondly, the recent decrease of the disparity is partly explained by the changes in industrial policies. Export promotion policies introduced after import substitution in mid-1980s relocated the manufacturing production bases. It was followed by other supporting industries. They increased the income level of remote areas, and it caused the decrease of the regional disparity. Finally, the author found that the case of Thailand is different from the case of Indonesia. Even though Indonesia is also growing with foreign direct investment like Thailand, no Kuznets’ U-shaped curve of regional disparity was observed.