Relationship between Conflict and Labor Market in the Deep South of Thailand

This study investigated the dynamic relationship between the conflicts and the labor market using the district-level quarterly data from four border provinces (Pattani, Yala, Narathiwat, and four districts from Songkhla). Using the Panel VAR, we found that conflicts had a negative but statistically insignificant impact on the labor market regarding the number of injuries. However, the number of wounds in the preceding period was positively correlated with the unemployment rate based on the Social Security Office data. In contrast, neither formal nor overall labor market fluctuations had affected conflict incidents. To ensure the robustness of our results, we used the synthetic control method to calculate the counterfactual unemployment rate and the counterfactual number of new establishments from annual provincial data. Our estimates of the effect of conflict on the unemployment rate and the number of new business openings were the difference between the reported values and their synthetic version during 2004 – 2017. We also used the two-way fixed effects model to analyze the correlation between the unemployment rate gap between the actual and synthetic provinces and the number of conflict incidences, government expenditure, and the defense budget share from the government expenditure. The unemployment rate in the deep South provinces was higher, and the number of new establishments was lower than in their comparable synthetic provinces. In addition, the number of incidences was positively correlated with the difference between the actual and the synthetic unemployment rate. The government expenditure was negatively correlated with the unemployment rate gap but statistically insignificant. Moreover, the defense budget share was positively correlated with the gap between the actual unemployment rate and its synthetic counterpart.