The impacts of fiscal and monetary policies on employment : a study of Thailand from 1983-2008
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2011
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2554
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eng
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xi, 196 leaves : ill. ; 30 cm.
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This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
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Marisa Laokulrach (2011). The impacts of fiscal and monetary policies on employment : a study of Thailand from 1983-2008. Retrieved from: http://repository.nida.ac.th/handle/662723737/880.
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The impacts of fiscal and monetary policies on employment : a study of Thailand from 1983-2008
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Abstract
Employment is one of the key economic indicators. Schools of economics have different perspectives toward the policies to stabilize employment. Keynesian theory states that deficiency of aggregate demand causes unemployment, and consequently the use of fiscal and monetary policies to increase aggregate demand can increase employment level. Classical, monetarist, and real business cycle theories state that macroeconomic policies cannot influence employment; instead, employment is generated by supply-side factors and nonintervention markets. Employment is also affected by socioeconomic factors. This research aims to study whether the employment level in Thailand is affected by monetary and fiscal policies, or if the effect comes from other policies. Secondary data from 1983 to 2008 were used in the study, and multiple regression analysis was applied. The employment of the entire nation, and also in each production sector, including agricultural, service, and industrial sectors, was studied. The researcher also studied the impacts of fiscal and monetary policies on underemployment in Thailand. The model analysis was divided into three models with the objective of studying the factors that really impact employment. The first model included monetary and fiscal policies as the independent variables. The second model included macroeconomic policies, and supply-side policies. The third model included all independent variables: macroeconomic policies, supply-side policies, and socioeconomic factors. The study of first model of impacts of macroeconomic policies on employment identified the positive impact of expansionary monetary policy on agricultural employment. Service sector employment was affected negatively by expansionary monetary policy. The second model showed that the reducing in tax rate increased the industrial sector employment. The third model showed that employment was affected by supply-side policies rather than fiscal or monetary policies. The results of the study confirmed classical, monetarist, and real business cycle theories. Socioeconomic factors in terms of industrialization and urbanization also affected employment significantly. However, the impacts of those supply-side and socioeconomic factors on each production sector’s employment were different. Agricultural sector employment had a disadvantageous impact from trade and financial openness. Further, Thailand has experienced a higher degree of industrialization during past two decades; thus the agricultural sector has had a lower production value and has been able to absorb less labor. Trade openness has also caused the agricultural sector to face higher levels of underemployment. The other supply-side factor that has affected the agricultural sector is the minimum wage rate. The increase in the minimum wage rate has caused laborers to have more purchasing power to consume agricultural products, and this finally increases employment level. Service and industrial sector employment has benefited from higher levels of trade and financial openness. The labor absorption ability of these sectors has increased. Service sector underemployment has also been reduced by trade openness. Most employees in the service and industrial sectors are in the formal sector, which means that they are covered by labor protection laws. The increase in the minimum wage rate has in turn increased the burden on corporations and has caused a reduction in employment level, as the results of the study indicate for service-sector employment. Since the employment and underemployment in each sector has been impacted by policies and factors differently, the government needs to use appropriate policies to stabilize the employment in each production sector. Regarding the agricultural sector, the government should continuously provide channels for raising funds. The improvement of infrastructure, such as water sources and land development, also needs to be emphasized in order to sustain production level in the long run. The government should try to profit from the increase in international openness so that it can expand the market for the agricultural sector. Investment privileges should be given to agricultural product export firms so that they can increase their competitive advantage in foreign markets and finally create employment. Regarding the service and industrial sectors, the government needs to encourage commercial banks and financial institutions to grant loans more to business sector, especially to small-and medium-enterprises that are labor intensive or have productions based in provincial areas. The government should provide tax advantages to firms in the industrial sector. There have been expansions in the free trade agreement between Thailand and other countries. The government should study each agreement in detail and make certain that Thai businesses can utilize those agreement preferences. The new open market will increase opportunities for the service and industrial sectors in terms of market share and in hiring more laborers.
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Thesis (Ph.D. (Development Administration))--National Institute of Development Administration, 2011