International spillovers, productivity growth and openness in Thailand

The present paper addresses the growth process of Thailand... After all the theoretical growth modeling and the cross-country growth regressions, we suggest to go back to the country level to understand the growth dynamics. The focus is on endogenous productivity growth in transition towards long run balanced growth. Thailand has had remarkable economic growth of about 6-7% and well above world averages for 40-50 years, in transformation from a ‘rice economy' to industrialization. Interestingly, this follows an earlier deindustrialization from domestically oriented rural industries to specialization in rice exports (the period 1870-1940). The more recent transformation has involved industrialization with labor- intensive manufacturing exports. The literature on endogenous productivity growth points to the role of research and development and innovation. But these key sources of productivity growth do not seem to be of great relevance for Thailand. Resource input to research and development is concentrated to the most developed countries of the North. Innovation is the result of R&D and certainly requires advanced skills, again not characterizing the local growth process. Human capital development and skill accumulation are important ingredients in Thailand, the low-tech labor- intensive industries in the country do not indicate that this is a major growth factor. Our analysis addresses learning by doing, technology adoption and foreign technology spillover as sources of productivity growth. Based on recent econometric evidence for Thailand, our understanding is that productivity growth has been related to the increased openness of the economy with the associated spillover of knowledge, incentives to improved organizational capital and disciplining of the work process.