Structural Transformation — How Does Thailand Compare?

IMF Working Papers, March 4, 2015

Source details

Thailand has a high dispersion of productivity across sectors in international comparison.
Labor productivity in agriculture is especially low relative to Thailand’s level of income.
Agriculture employs a much larger share of the population than is typical for a country at Thailand’s level of income.
Large potential productivity gains exist from labor reallocation across sectors.
The process of labor reallocation, which contributed significantly to past growth, appears to have stalled lately.
Agriculture functions as the employer of last resort with useful social and economic roles.

The paper establishes the facts about productivity dispersion and stalled structural transformation and applies a simple model to discuss possible explanations.
Possible explanations identified include:
- A gap between the skills possessed by rural workers and those required in the modern sectors.
- Government price support programs for several agricultural commodities, particularly rice.
- The uniform minimum wage.
The model and discussion focus on how these factors may impede labor reallocation from low-productivity agriculture to higher-productivity sectors.

The paper makes a number of policy recommendations aimed at facilitating structural transformation in the Thai economy. (The source lists recommendations aimed at addressing skills gaps, price support distortions, and labor market rigidities such as the uniform minimum wage.)

_wp1551 - Section VI–VII model, evidence, and policy implications
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