Structural Transformation in Thailand: A Perspective Through Product Innovation

This paper examines Thailand’s economic development through the perspective of structural transformation. Building on the insight that the products that a country exports tells much about the country’s underlying capabilities, we study Thailand’s evolving product structure both at the aggregate country level as well as at the firm level. We show that over the last 30 years, the diversification of Thailand’s product structure has been impressive, with important footholds being established in many well-connected and increasingly sophisticated products. This positive overall picture, however, masks potentially serious distributional problems. The number of firms and the number of provinces that are actively engaged in and contributing materially to Thailand’s product upgrading are highly concentrated. This may be limiting the gains to the economy more broadly. We confirm the importance of existing product structures at the country, regional, and firm levels for the evolution of firms’ product structure over time. That is, the current basket of goods produced by firms, regions, and the country affect firms’ decision over which products to introduce and which ones to drop. This path-dependent nature of product innovation has important implications for policy.