Thailand and the Middle-Income Trap: An Analysis from the Global Value Chain Perspective

Upalat Korwatanasakul

No 202, PIER Discussion Papers from Puey Ungphakorn Institute for Economic Research

Abstract: The study provides a novel analysis through the lens of the global value chain (GVC) framework with empirical data of trade in value added, which has not been explored much in the literature, to explain the issue of the middle-income trap in the context of Thailand by matching GVC data at the firm, industry, and country levels with the economic development path. The findings support the previous studies that GVC participation helps induce initial industrialisation and economic development. However, it does not guarantee technological upgrading at a later stage due to the risk of falling into the middle-income technology trap (MITT). Thailand depends heavily on passive technology and specialisation given by headquarter economies, which lock the country in the middle of value chains with limited knowledge and technology transfer. As a result, the country fell into the MITT. The MITT, together with other confounding factors, such as eroding competitiveness in labour-intensive production, made Thailand unable to sustain its growth and catch up with more innovative advanced economies and, in turn, fell into the middle-income trap. To escape from both traps, the government may consider policies that can deal with the issues of insufficient knowledge and technology transfer and a lack of local firms’ capacities as they are the primary causes of the limited upgrading. In addition, the study manifests the necessity of a contextual analysis at the industry level to understand value-added components and the importance of the quality of domestic value added sources.

Keywords: Economic development; Global value chain (GVC); GVC participation; Middle-income trap; Thailand (search for similar items in EconPapers)
JEL-codes: F13 F14 L25 O24 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2023-03
New Economics Papers: this item is included in nep-cse, nep-int and nep-sea
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Citations: View citations in EconPapers (1)

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