The technical progress function is an economic measure which seeks to explain changes in the level of economic output in terms of the level of technical progress and innovation in a country. Rather than looking at economic growth as a form of efficiently allocating inputs, the technical progress function explains economic growth regarding investment in technological progress.
From equation chapter 3, the technological progress can be structured as log 𝑦 = log 𝐴 + 𝑔𝑡 + 0.25 log 𝐾 + 0.75 log 𝐿
A common measure of technological progress is growth in total factor productivity (TFP). This is the relative efficiency with which an economy produces goods and services in additions to labor and capital.
Table 4.10: Sources of Thailand’s Economic growth by technological progress:
Increase (%)
Table 4.11: Sources of Thailand’s Economic growth by technological progress:
Regression Statistics
Regression Statistics Multiple R 0.945092489 R Square 0.893199814 Adjusted R Square 0.882519795 Standard Error 15064.21564
Observations 12
Predictor Coefficient Standard Error T-Statistic P-Value
Constant -7987.597299 526645.3419 -0.015166938 0.988229899 K (Capital) 2.600635544 1.043703595 2.49173765 0.034324008 L (Labor) 0.003750442 0.015195738 0.246808843 0.81059375
Table 4.10, the result show that during 2007 – 2018 rate of increase in technological progress for the Thailand is more than 3 percent.
Panel data regression results are presented in Table 4.11 that follows. According to the result of the column labeled the 𝑅2! that can show the regression relationship is very strong; 89% of the variability in the number of economic growths can be explained by the linear relationship between the numbers of technology progress.
Strong economic growth is not only from expenditures, production, and labor productivity. The result seems plausible since technological innovations change.
Technology plays an important role than the capital formation. It is the technological change which can bring about continued increase in output per head of the population.
Thus, it is the prime mover of economic growth.
Chapter 5: Concluding Remarks
I. Major Contributions
The purpose of this study was to investigate the sources of economic growth affecting gross domestic product (GDP) in Thailand. A number of gross domestic product (GDP) was proxies by its sources of economic growth as measured by expenditures, sectors, input and technology. The period of analysis covered the years between 2007 and 2018. The result of panel regression with fixed effects and robust standard errors showed that all source specific variables have a significant impact on the gross domestic product (GDP) of Thailand in the sample.
A. Expenditures
The first finding from the analysis is that expenditures including export, consumption and gross fixed domestic formation has a positive and significant effect on gross domestic product (GDP) in Thailand. In the other hand, investment further declined in recent years. Firms cited political uncertainty as the main obstacle to doing business in Thailand (World Bank Enterprise Survey 2016). Political uncertainty weighed on investor sentiment as firms perceive a lack of policy continuity and possible delays in planned reforms and public infrastructure projects. Other constraints cited in the enterprise survey, such as electricity and transportation, highlight the importance of infrastructure. For large firms, labor regulations proved to be a major issue. In addition, Amarase et al (2013) finds that protected sectors exhibit less creative destruction and flows of capital to productive firms associated with healthy investment levels. Still, the
small scale of improvements in private investments and business sentiment indicators suggest that economic recovery is not yet broad-based and underscores the importance of accelerated reforms and public investments to underpin stronger long-term growth.
Net exports were the largest contributor to growth, mainly driven by a continued expansion of tourism and lower imports. The tourism sector remained an important growth driver, despite a slowdown in the number of Chinese tourist due to measures to curb illegal tour operators. Consequently, service export growth continues increasing.
Nevertheless, sustaining high growth in tourism will become challenging due to limited destination and constrained soft and hard infrastructure. Merchandise exports showed signs of improvements, particularly in electrical appliances, electronics products, and automobile and parts. These resulted largely from increased demand from Europe, the US, and Japan, as well as the relocation of production bases of pneumatic tires and solar cells from China.
B. Sectors
On the sectors side, growth continued to be driven by the industry sector growth with output expanding by 1.4 percent, because of continued structural constraints such as political uncertainty and infrastructure bottlenecks. Growth was stronger in export-oriented industries, as merchandise exports increased in line with higher demand from main trading partners. Rising merchandise exports and increased production of electrical appliances and electronics were offset by a contraction in the automotive sector, which had been growing in recent years. Thailand aims to reform five key industries – automotive, electronics, affluent medical and wellness tourism, agriculture, and biotechnology – as part of its ‘S-Curve’ economic strategy, and is now working on
five more including robotics, aviation and logistics, biofuels and biochemical, digital industry and medical services
Agriculture sector showed signs of recovery were stronger, when agricultural output expanded by 3 percent. Higher output and prices for rubber and palm oil, as well as higher paddy yields, supported farm income and private consumption growth. In the long run, managing the impact brought by cycles of flood and drought through improved water management is a key priority.
Services sector, which expanded by 4.3 percent continued to be the fastest-growing sectors in the economy, though accounting for a relatively small share of total GDP. Growth in these sectors was driven largely by the increased number of tourist arrivals, from 35.5 million in 2017 to 38.3 million in 2018, percent change from 2017 to 2018 is 7.9%, and increased investments in public infrastructure. The weight of tourism in Thailand's production and export growth further highlights the importance of maintaining competitiveness in the sector by addressing weaknesses and removing constraints for future growth.