The Income and Consumption Effects of Covid-19 and the Role of Public Policy
This paper provides empirical evidence on how the labour market impacts of the covid-19 pandemic vary across workers’ incomes, assets, characteristics and household structures in the UK. Using data from the UK Household Longitudinal Study, we find that less educated and young workers are most likely to be laid-off. This is particularly the case for females. Moreover, less educated workers tend to have low income and low assets, limiting their ability to maintain consumption in the face of reduced income. This is compounded at the household level by assortative partnering between workers with similar education levels. We analyse the source of these inequalities by relating employment outcomes to factors related occupational and industrial characteristics. We then conduct a quantitative assessment of the likely impact of covid-19 on households’ consumption and find that, because the adverse labour market impacts are concentrated on workers with low income and low assets, 70 percent of households in the bottom fifth of the income distribution cannot maintain their usual expenditure for even one week. Finally, we consider the effectiveness and distributional implications of two different policy interventions: the Coronavirus Job Retention Scheme in the UK and Economic Impact Payments in the US. Our findings suggest that both policies can alleviate the increase in consumption inequality that would have otherwise arisen during the pandemic. In the short term, the US-style one-off payment is most effective at providing affected households with the means to smooth consumption. However, the CJRS provides better insurance against prolonged disruption as the program provides continuous income support.
Common Ownership, Domestic Competition, and Export: Evidence from Thailand
We use administrative data of all registered firms in Thailand, both public and private, to study the relationships between common ownership, market power, and firms’ export behaviors. Our results suggest that firms in ownership networks tend to have higher market power as measured by markup. In addition, markup is negatively associated with a firm’s propensity to export, its likelihood of product upgrade, and the chance of survival in foreign markets. Our findings have policy implications on antitrust regulations and competitiveness policies, especially in export-oriented economies dominated by powerful business conglomerates.
Understanding the Bimodality of the Export Intensity Distribution in Thailand
The literature has established a pattern that exporters in developed countries sell most of their output in their domestic markets. However, recent evidence finds that firm-level export intensity, defined as the ratio of exports to revenue, in at least 47 countries is bimodally distributed. In this paper, we investigate the determinants of the bimodality of Thailand’s export intensity distribution by using Thailand’s manufacturing firm-level census data covering the period between 2007-2017. We do not find evidence that firm productivity can explain the variation in export intensity. We document that firms with export intensity at least 90 percent, so-called “pure exporters,” can be explained by (i) the firm’s characteristics, (ii) the demand-side factor, and (iii) the government’s policy. Pure exporters are relatively young, have foreign ownership, produce narrow product variety, and export to high-income countries. The government’s policy, such as investment promotion, can raise firms’ export intensity and encourage firms to become pure exporters, there by emphasizing another important channel through which the government can increase exports.
Cash flow uncertainty and IPO underpricing: Evidence from Thai REITs
REIT IPOs in Thailand are less underpriced than stock IPOs (2.45% compared to 23.0%), which is a common finding across many international markets (Chan, Chen and Wang, 2013). One of the most common explanations for IPO underpricing is adverse selection arising from information asymmetry. However, research in IPO tends not to investigate this issue directly due to the difficulty in estimating ex-ante uncertainty. REITs provide a unique research setting because some REITs enjoy income guarantee, which can reduce cash flow uncertainty. We find that REITs with income guarantee are much less underpriced on average, corroborating the linkage between cash flow uncertainty and IPO underpricing. We confirm that REITs with income guarantee tend to have lower systematic risk (measured by CAPM beta) and returns, making the nature of some REITs more debt-like than equity-like.
Effect of Minimum Wage on Changes in the Thai Labor Market
This study evaluates the effect of the minimum wage on changes in the Thai labor market from 2002 to 2010, when the real minimum wage gradually decreased, and 2011 to 2013 when the real minimum wage substantially increased. These changes include labor force participation, employment, dis-employment, weekly working hours, real hourly wages, real hourly total labor income, and various other types of income. This study uses the individual-level panel data generated from the Matched-Outgoing Rotation Group (Matched-ORG) of the Thai Labor Force Survey. We observed the negative effect of minimum wage on employment, where the elasticity was in the range of – 0.0029 to -0.0474. We also observed the dis-employment for the foreign workers. We found that firms adjust working hours and various types of income to mitigate minimum wage shock. We conclude that the competitive equilibrium theory can reasonably explain the effect of minimum wage on employment as well as the overall changes in the Thai labor market from 2002 to 2013.
Bunching for Free Electricity
This paper documents the impacts of Thailand’s Free Basic Electricity program on electricity consumption behavior. Under the program, households who use less than 50 units are exempt from paying their electricity bill in that month, while households who use more than 50 units have to pay for the full amount. The program thus creates a large notch in the household’s budget set. In contrast to existing literature that finds little or no bunching, we observe a distinct bunching of electricity consumption around the threshold. Nonetheless, the excess bunching is still small compared to the overall distribution. We provide possible explanations on the role of various optimization frictions.
Delinquency Priority in Consumer Credit: Evidence from Thai Microdata
This study examines the question of how consumer prioritize default across products. We find that about a third of Thai individuals who face default decisions on mortgage and non-mortgage loans choose to default on mortgage loans first. As predicted by theory, their decisions are influenced by relative debt burden and amount of housing equity, consistent with both the ability to pay and the willingness to pay channels. We also find a puzzling result that borrowers who hold older mortgage loans are more likely to default on their mortgages; we hypothesize that this is perhaps related to refinancing.
Incorporating Discrete Choice Experiments into Policy Decisions: Case of Designing Public Long-Term Care Insurance
Discrete choice experiments (DCEs) have been widely used to elicit preferences in the health economics field but recent reviews found that DCE results are rarely incorporated into health policy decisions. We conjecture that one reason is most health policy practitioners only focus on estimating marginal willingness to pay (MWTP), the measure that is not directly applicable for policy-related questions. We show that when designing a new program, translating preference information into the demand for packages and benefits of alternative schemes (the choices made available) can make the DCE results more policy relevant. This concept is illustrated using data collected to evaluate the benefits of introducing a public long-term care insurance program to a middle-income country, Thailand. We find that preferences are very heterogeneous, implying that no one-size-fits-all solution exists. The estimates from the preferred model are then used to calculate benefits and losses (based on the consumer surplus measure) for plausible implementation scenarios such as different universal schemes, multiple-tier schemes, and schemes in which premium are subsidized for low-income households.
On Covid-19: New Implications of Job Task Requirements and Spouse’s Occupational Sorting
The Covid-19 pandemic has disrupted working life in many ways, the negative consequences of which may be distributed unevenly under lockdown regulations. In this paper, we construct a new set of pandemic-related indices from the Occupational Information Network (O*NET) using factor analysis. The indices capture two key dimensions of job task requirements: (i) the extent to which jobs can be adaptable to work from home; and (ii) the degree of infection risk at workplace. The interaction of these two dimensions help identify which groups of workers are more vulnerable to income losses, and which groups of occupations pose more risk to public health. This information is crucial for both designing appropriate supporting programs and finding a strategy to reopen the economy while controlling the spread of the virus. In our application, we map the indices to the labor force survey of a developing country, Thailand, to analyze these new labor market risks. We document differences in job characteristics across income groups, at both individual and household levels. First, low income individuals tend to work in occupations that require less physical interaction (lower risk of infection) but are less adaptable to work from home (higher risk of income/job loss) than high income people. Second, the positive occupational sorting among low-income couples amplifies these differences at the household level. Consequently, low-income families tend to face a disproportionately larger risk of income/job loss from lockdown measures. In addition, the different exposure to infection and income risks between income groups can play an important role in shaping up the timing and optimal strategies to unlock the economy.
Digital Thailand: Analyzing the Impact of Broadband Connectivity on Firm Productivity
Using a large dataset of almost 100,000 manufacturing establishments in Thailand, this paper studies the impact of broadband internet connectivity on firms’ total factor productivity (TFP). The author finds that, for micro-, small-, and medium-sized enterprises, broadband adoption can raise productivity by 23% to 54%. These results support the government’s policies in building the country’s broadband infrastructure. Although the results reveal substantial benefits of broadband adoption, especially for smaller-sized firms, only about 30% of firms reported adopting broadband or having any types of ICT investments. Perhaps, more could be done to encourage broadband adoptions and private ICT investments for firms of all sizes.
Mutual Fund Participation in IPOs: Thai Evidence
Underwriters and co-managers play an important role in IPOs, but because they often have affiliated mutual funds, concerns about conflicts of interest can arise. On the one hand, they can use this affiliation for the benefit of their asset management business (the information advantage hypothesis); on the other hand, they can use mutual funds under their control to support their IPO clients (the quid pro quo hypothesis). In this article, we find that the behavior of lead underwriter-affiliated funds in Thailand is more consistent with the information advantage hypothesis and co-manager-affiliated funds more consistent with the quid pro quo hypothesis. We also find further evidence of strategic placement of IPO stocks within fund family.
Uncertainty and Economic Activity: Does it Matter for Thailand?
This paper investigates the role of domestic and foreign uncertainty shocks for macroeconomic dynamics in Thailand. We construct and compare various indicators of economic and policy uncertainty, including macroeconomic and financial uncertainty, as well as monetary policy, fiscal policy, and political uncertainty. We find that while all uncertainty measures display countercyclical behavior, they generate heterogenous effects on real GDP and its components depending on the type of shock. In general, the magnitude of real activity decline in response to economic and policy uncertainty shocks are on the scale of 1-2 percent, with most of the transmission occurring through investment and trade flows rather than consumption demand. In terms of persistence, Thai macroeconomic uncertainty shocks generate sudden impacts, while the effect of other shocks on the economy are more gradual. Despite being a small open economy, we find that domestic uncertainty shocks can be as prominent as uncertainty shocks that spillover from abroad. Thai monetary policy shocks generate declines in real activity that are as large and persistent as US financial uncertainty shocks, whereas the impact of both Thai fiscal policy uncertainty and US economic policy are both rather short-lived. Furthermore, we find that uncertainty is a key driver of fluctuations in domestic output, with certain types of uncertainty being able to explain up to 40 percent of the variation in real activity, even in the long run. Finally, we observe asymmetry in the effects of downside versus upside economic uncertainty shocks, but no difference between uncertainty of short versus long horizons.
ESG and Creditworthiness: Two Contrary Evidence from Major Asian Markets
Assets managed under sustainable investment criteria have been massively growing during the recent years. Among the criteria, environmental, social and governance (ESG) score leads the group as an important indicator of non-financial quality of a firm, which may reflect value to investors either through higher expected profit or lower risk. In this paper, we focus on the latter by exploring whether ESG score has any impact on the credit rating of firms due to the risk mitigation effect. Ordered logistic regressions were applied on a panel dataset of listed companies in Shanghai and Tokyo Stock Exchanges over 2009 – 2018. The results suggest that only in Japan, having ESG coverage is greatly associated with being awarded higher credit rating. However, just the environmental and governance pillars positively affect the Japanese firms’ credit ratings, while the social pillar shows negative effect.
COVID-19 and Endogenous Public Avoidance: Insights from an Economic Model
In this paper, I study the transmission of COVID-19 in the dynamic SEIR (Susceptible, Exposed, Infectious, and Removed) model that allows individuals to optimally choose their public avoidance actions in response to the COVID-19 risk. I allow for heterogeneity in infection rates across age groups and structurally estimate the parameters to match the daily pattern of new cases and the ratio of patients by age group. Even in the absence of intervention, the elderly,
who face a greater risk of death from COVID-19, are more likely than the young to take self-protective actions. In contrast to models with a fixed transmission rate, my model can capture the heterogeneity in the fraction of infected individuals among different age groups.
Assessing Tax Burden Differential Between Foreign Multinationals and Local Firms: Implications for FDI Tax Incentives
This study uses firm-level data from ASEAN5 to examine whether there are systemic differences in how reported profit is taxed between foreign multinational and comparable local firms. Using propensity score matching, it finds that the effective tax rate (ETR: tax expense divided by pre-tax profit) of foreign MNEs is 1.8 percentage point lower than that of local firms. It also shows that the preferential tax treatment is responsible for 95% of the ETR differential. Under the baseline scenario, the associated revenue loss is 2.6% of total corporate income revenue.