INTERNATIONAL SPILLOVERS, PRODUCTIVITY GROWTH AND OPENNESS IN THAILAND: AN INTERTEMPORAL GENERAL EQUILIBRIUM ANALYSIS

Thailand has experienced economic growth well above world averages for about 40years. It is a challenge to understand the sources of this high growth path, and inparticular why growth has not slowed down with assumed decreasing returns to capital.We develop an intertemporal general equilibrium model separating between agricultureand industry, and with open capital market and endogenous productivity growth toanalyze the underlying adjustment mechanisms. Foreign technology spillover embodiedin trade is assumed to be the driving force of the productivity growth, consistent witheconometric evidence. The high growth experience is understood as a transition path withinteraction between productivity growth, openness and capital investment. Counterfactualanalysis shows how protection may have had serious detrimental effect on growth ratedue to productivity and investment slowdown. The role of relative prices in constraininggrowth is investigated, inspired by the Acemoglu-Ventura hypothesis of growthslowdown due to terms of trade effect. In our setting, low elasticity between domestic andexports goods in supply leads to large relative price shifts for domestic goods, butpromotes investment and growth during transition.