Poverty Reduction through Long-term Growth: The Thai Experience^*

Thailand's impressive long-term rate of economic growth has resulted mainly from accumulation of physical capital. Total factor productivity (TFP) growth at the economy-wide level explains about one-third of the aggregate growth of output. However, this TFP growth was due entirely to resource reallocation from low-productivity sectors, especially agriculture, to higher-productivity industry and services sectors. TFP growth at the sectoral level has been important only in agriculture. Poverty has declined remarkably over time despite a steady increase in income inequality. The rate of decline in poverty incidence has been directly related to the rate of economic growth.