The effect of population structure on economic development: Thailand's provincial panel data

Abstract

This research investigates the effects of demographic change, the change of labor supply, and human capital on Thailand’s economic development. This will help shed light on the relationship between population (quantitatively and qualitatively) and economic development. The demographic dividends, the neoclassical growth Solow-Swan model, and human capital are adopted as the conceptual framework for this research. The secondary panel data at the provincial level from government officials will be used for statistical analysis. Fixed effect or random effect with lagged dependent variable is introduced into the estimated model. The finding suggests that the labor productivity, employment level, share of the active labor force have significant and strongly positive to Thailand’s economic development. While youth dependency ratio has a significant and strong negative effect on Thailand’s economic development. The rest of the variables have weakly effect on Thailand’s economic development. In addition, there are some findings that reversed the original proposal which is the old-age dependency ratio that has a significant and weakly positive effect on Thailand’s economic development and the share of the working-age population that has a significant and weakly negative effect on Thailand’s economic development. The finding suggests that Thailand should benefit from labor productivity and enjoy benefits from this. In the long run, the government to develop labor productivity, this may be achieved through training, lifelong learning, and education among other means. Concerning the negative of the youth dependency ratio Thailand’s economic development, the research findings suggested that the reduction of the youth dependency ratio would lead to better economic development. However, the decrease in the youth dependency ratio also implies a lower number of labor force who will enter the labor market in the future. This will also negatively impact Thailand’s economic development. Therefore the problem will become loops. the government must pay more attention to the fertility policy because a good fertility policy will increase the birth rate, which will impact the country’s future labor supply. This policy must strike a balance between the short- and the long-run. If there are too many births, this will increase dependency. On the contrary, without enough births, there would be a shortage of labor.