The Effect of Total Factor Productivity on Household Income Inequality: A Dynamic Computable General Equilibrium Analysis of Thailand

Authors

  • Nara Panprayad College of Interdisciplinary Studies, Thammasat University

DOI:

https://doi.org/10.61462/cujss.v50i2.702

Keywords:

total factor productivity, economic growth, household income inequality

Abstract

This study investigates an economic impact of total production factor productivity (TFP) on household income inequality under the dynamic computable general equilibrium model (DCGE). The study reveals that a 5% increase in TFP in all production sectors will result in an increase in real gross domestic product by 5% in the short run and by 6.11% in the long run. Not surprisingly, such continual increase confirms the stylized fact that TFP stimulates gross output value and therefore accrues household incomes in all production sectors.

Nonetheless, TFP has a detrimental effect on income inequality in all production sectors, both in the medium and long terms. This is because the household income tax rate has not sufficiently progressed to extract income of the richest household groups, particularly in the agricultural sector.

Plausible policy recommendations are twofold. First, a more progressive household income tax rate must be put in place. Second, the labor and the capital factors of agricultural households should be reallocated to non-agricultural sectors that tend to have less income inequality.

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Published

07-09-2022

How to Cite

Panprayad, Nara. 2022. “The Effect of Total Factor Productivity on Household Income Inequality: A Dynamic Computable General Equilibrium Analysis of Thailand”. Chulalongkorn University Journal of Social Sciences 50 (2). Bangkok, Thailand:49-70. https://doi.org/10.61462/cujss.v50i2.702.

Issue

Vol. 50 No. 2 (2020): July - December

Section

Research Articles

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