Departmental Bulletin Paper How Should the Thai Government Change its Policy for Narrowing Income Disparity among the Provinces?
How Should the Thai Government Change its Policy for Narrowing Income Disparity among the Provinces?

江川, 暁夫

In Thailand, a so-called `grassroots policy' was implemented in the early 2000s as an attempt to solve income inequality among households nationwide and income disparities among the provinces. The grassroots policy was recognised as a policy staple for local communities regardless of which political regime was in power, but after the coup d'etat in 2014, the interim government abolished some grassroots projects. It believed that those projects caused a large loss of public expenditures and may have been used for corruption, but abolishment of a project should be determined after considering the appropriateness of targeted beneficiaries and after examining the income redistributive effects of the project's goals. This study points out that continuation of some previous individual grassroots projects would hamper the development of local economies by overly restricting the mobility of workers in rural areas or agricultural sectors, and would result in worsening of income disparities among the provinces. Thailand is at a stage of development where tertiary industries should become the leading industries. In order for those industries to develop, the country should promote agglomeration of industries and population into local core cities. Among the grassroots projects, the small-scale rural development projects do not have a counter effect in principle but were sometimes used merely to inject profits into individual businesses and help individual household consumption. Admitting such wrong access to these projects may result in reluctance of rural people to move to local cities. The income support schemes for farmers have the effect of making farmers stick to their farmland in rural areas as long as the benefit is sufficiently great. Among the individual grassroots projects which did not have a counter effect, some of them are clearly inefficient at improving income inequality or were designed to have a counter effect to income inequality improvement. Even for grassroots projects which were correctly motivated and designed, some of them suffered operational mistakes, resulting in failure to improve income inequality. A best policy option for income inequality alleviation is a direct rich-to-poor income transfer, but, as only formal sector workers are currently covered by the individual income tax system in Thailand, introducing a tax schedule which guarantees a more direct rich-to-poor income transfer would realise an income transfer only among high-income persons. Therefore, the government should start establishing an institution capable of collecting and reporting income levels for households nationwide.

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