B. Income DistributionB. Income Distribution

B. Income DistributionB. Income Distribution Measurement : Lorenz CurveMeasurement : Lorenz Curve

Lorenz curve shows the distribution of income Lorenz curve shows the distribution of income of a group of people where the number of of a group of people where the number of people is cumulatively staggered from poorest people is cumulatively staggered from poorest to richest, from 0 to 100 %, and plotted on the to richest, from 0 to 100 %, and plotted on the horizontal axis of a unit square, and the horizontal axis of a unit square, and the cumulative income of these people is plotted cumulative income of these people is plotted on the vertical axis. The curve that joins all on the vertical axis. The curve that joins all these coordinates is called the Lorenz Curve.these coordinates is called the Lorenz Curve.

3

Measurement of income inequalityMeasurement of income inequality Lorenz CurveLorenz Curve

(% of income)

(% of population)

A

B

0

Gini coefficient = A/(A+B) 100

100

Perfect equality line

Gini Ratio or Gini CoefficientGini Ratio or Gini Coefficient

Measures income distribution as a Measures income distribution as a ratio of area under the Lorenz ratio of area under the Lorenz curve and the triangle under the curve and the triangle under the diagonal line of perfect equality.diagonal line of perfect equality.

G = A/(A+B)G = A/(A+B) G = 0 means perfectly equal income G = 0 means perfectly equal income

distribution; G = 1 means perfectly distribution; G = 1 means perfectly unequal income distributionunequal income distribution

Income share by quintile groupIncome share by quintile group Annual income or life-time income?Annual income or life-time income? Including capital gains and income in Including capital gains and income in

kind?kind? Functional income distribution Functional income distribution

(factors of production) (factors of production) VS VS Size Size income distribution income distribution (individuals)(individuals)

The Kuznets HypothesisThe Kuznets Hypothesis

Simon Kuznets concludes from his studies Simon Kuznets concludes from his studies of the relationship between economic of the relationship between economic growth and income distribution that in growth and income distribution that in the early stage of economic development the early stage of economic development when the national income is growing, when the national income is growing, the distribution of income will worsen the distribution of income will worsen first but will later improve as the first but will later improve as the economy has grown past a certain level.economy has grown past a certain level.

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Kuznets CurveKuznets Curve

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46

47

48

49

50Gini ratio

4000300020001000

Per capita income

Table 2 Distribution of personal income(%)Table 2 Distribution of personal income(%)

Income 1960 1970 1980 1990 2003

Employment 27.9 23.4 32.9 38.8 51.0

Unincorporated enterprises(1) 62 64.6 55.3 48.3 12.7

Property and Entrepreneurship 9.7 11.7 11.1 11.1 25.1

Current transfers(2) 0.4 0.4 0.8 0.5 11.2

Total personal income 100 100 100 100 100

1. Profits from farming

2. Includes assistance payment , pension and annuities , terminal pay

Table 4 Income Share by quintile group (%)

Year Gini Coef

quintile 1Bottom

(20%)quintile 2

Next (20%)

quintile 3Middle(20

%)quintile 4

Next (20%)quintile 5

Top (20%)

1996 0.515 4.2 7.5 11.8 19.9 56.7

1998 0.511 4.2 7.6 11.9 19.8 56.5

2000 0.525 3.9 7.2 11.5 19.7 57.8

2002 0.501 4.2 7.8 12.3 20.5 55.2

2004 0.499 4.2 7.8 12.3 20.3 55.2

Table 5 Income Share and Gini coefficient by region , 1988 and 2004

     

RegionPopulation

(1988)Population

(2004)Income(1988)

Income(2004)

Gini Coef(1988)

Gini Coef(2004)

North 19.7 17.8 17.8 14.3 0.453 0.512

Northeast 34.3 33.5 20.4 21.2 0.41 0.519

Centre 18.5 18.8 18.4 21.3 0.408 0.469

South 12.9 13.3 11.4 12.1 0.439 0.474

Bangkok+Vicinity 14.6 16.1 32 31 0.385 0.426

Whole kingdom 100 100 100 100 0.479 0.499

11

Kuznets Curve Kuznets Curve andand Thai Develop Thai Developmentment

45

46

47

48

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50Gini ratio

4000300020001000รายได้�ต่�อหั�ว

RankRank CountryCountry   Survey yearSurvey year   Gini indexGini index Percentage share of income or consumptionPercentage share of income or consumption

             Lowest Lowest

10%10%Lowest Lowest

20%20%Second Second

20%20%Third Third 20%20%

Fourth Fourth 20%20%

Highest Highest 20%20%

Highest Highest 10% 10%

11 NamibiaNamibia 1993 1993 c,dc,d 70.770.7 0.50.5 1.41.4 3.03.0 5.45.4 11.511.5 78.778.7 64.564.5

22 LesothoLesotho 1995 1995 a,ba,b 63.263.2 0.50.5 1.51.5 4.34.3 8.98.9 18.818.8 66.566.5 48.348.3

88 BrazilBrazil 2001 2001 c,dc,d 59.359.3 0.70.7 2.42.4 5.95.9 10.410.4 18.118.1 63.263.2 46.946.9

1111 ColombiaColombia 1999 1999 c,dc,d 57.657.6 0.80.8 2.72.7 6.66.6 10.810.8 18.018.0 61.861.8 46.546.5

1212 ChileChile 2000 2000 c,dc,d 57.157.1 1.21.2 3.33.3 6.66.6 10.510.5 17.417.4 62.262.2 47.047.0

1616 MexicoMexico 2000 2000 a,ba,b 54.654.6 1.01.0 3.13.1 7.27.2 11.711.7 19.019.0 59.159.1 43.143.1

1919 ArgentinaArgentinaee 2001 2001 c,dc,d 52.252.2 1.01.0 3.13.1 7.27.2 12.312.3 21.021.0 56.456.4 38.938.9

2626 MalaysiaMalaysia 1997 1997 c,dc,d 49.249.2 1.71.7 4.44.4 8.18.1 12.912.9 20.320.3 54.354.3 38.438.4

3434 PhilippinesPhilippines 2000 2000 a,ba,b 46.146.1 2.22.2 5.45.4 8.88.8 13.113.1 20.520.5 52.352.3 36.336.3

3535 BoliviaBolivia 1999 1999 a,ba,b 44.744.7 1.31.3 4.04.0 9.29.2 14.814.8 22.922.9 49.149.1 32.032.0

3636 ChinaChina 2001 2001 a,ba,b 44.744.7 1.81.8 4.74.7 9.09.0 14.214.2 22.122.1 50.050.0 33.133.1

4242 ThailandThailand 2000 2000 a,ba,b 43.243.2 2.52.5 6.16.1 9.59.5 13.513.5 20.920.9 50.050.0 33.833.8

4747 SingaporeSingapore 1998 1998 c,dc,d 42.542.5 1.91.9 5.05.0 9.49.4 14.614.6 22.022.0 49.049.0 32.832.8

5151 United StatesUnited States 2000 2000 c,dc,d 40.840.8 1.91.9 5.45.4 10.710.7 15.715.7 22.422.4 45.845.8 29.929.9

6060 PortugalPortugal 1997 1997 c,dc,d 38.538.5 2.02.0 5.85.8 11.011.0 15.515.5 21.921.9 45.945.9 29.829.8

RankRank CountryCountry

  Survey Survey yearyear

  Gini Gini indexindex Percentage share of income or consumptionPercentage share of income or consumption

             Lowest Lowest

10%10%Lowest Lowest

20%20%Second Second

20%20%Third Third 20%20%

Fourth Fourth 20%20%

Highest Highest 20%20%

Highest Highest 10% 10%

6565 Lao PDRLao PDR 1997 1997 a,ba,b 37.037.0 3.23.2 7.67.6 11.411.4 15.315.3 20.820.8 45.045.0 30.630.6

6666 VietnamVietnam 2002 2002 a,ba,b 37.037.0 3.23.2 7.57.5 11.211.2 14.814.8 21.121.1 45.445.4 29.929.9

7272 New ZealandNew Zealand 1997 1997 c,dc,d 36.236.2 2.22.2 6.46.4 11.411.4 15.815.8 22.622.6 43.843.8 27.827.8

7373 ItalyItaly 2000 2000 c,dc,d 36.036.0 2.32.3 6.56.5 12.012.0 16.816.8 22.822.8 42.042.0 26.826.8

7474 United KingdomUnited Kingdom 1999 1999 c,dc,d 36.036.0 2.12.1 6.16.1 11.411.4 16.016.0 22.522.5 44.044.0 28.528.5

7676 IsraelIsrael 1997 1997 c,dc,d 35.535.5 2.42.4 6.96.9 11.411.4 16.316.3 22.922.9 44.344.3 28.228.2

7979 AustraliaAustralia 1994 1994 c,dc,d 35.235.2 2.02.0 5.95.9 12.012.0 17.217.2 23.623.6 41.341.3 25.425.4

8282 IndonesiaIndonesia 2002 2002 a,ba,b 34.334.3 3.63.6 8.48.4 11.911.9 15.415.4 21.021.0 43.343.3 28.528.5

8888 CanadaCanada 1998 1998 c,dc,d 33.133.1 2.52.5 7.07.0 12.712.7 17.017.0 22.922.9 40.440.4 25.025.0

9191 FranceFrance 1995 1995 c,dc,d 32.732.7 2.82.8 7.27.2 12.612.6 17.217.2 22.822.8 40.240.2 25.125.1

9393 IndiaIndia 1999-00 1999-00 a,ba,b 32.532.5 3.93.9 8.98.9 12.312.3 16.016.0 21.221.2 43.343.3 28.528.5

9898 BangladeshBangladesh 2000 2000 a,ba,b 31.831.8 3.93.9 9.09.0 12.512.5 15.915.9 21.221.2 41.341.3 26.726.7

9999 Korea, Rep.Korea, Rep. 1998 1998 c,dc,d 31.631.6 2.92.9 7.97.9 13.613.6 18.018.0 23.123.1 37.537.5 22.522.5

100100 Russian FederationRussian Federation 2002 2002 a,ba,b 31.031.0 3.33.3 8.28.2 12.712.7 16.916.9 23.023.0 39.339.3 23.823.8

101101 NetherlandsNetherlands 1999 1999 c,dc,d 30.930.9 2.52.5 7.67.6 13.213.2 17.217.2 23.323.3 38.738.7 22.922.9

111111 GermanyGermany 2000 2000 c,dc,d 28.328.3 3.23.2 8.58.5 13.713.7 17.817.8 23.123.1 36.936.9 22.122.1

118118 NorwayNorway 2000 2000 c,dc,d 25.825.8 3.93.9 9.69.6 14.014.0 17.217.2 22.022.0 37.237.2 23.423.4

122122 SwedenSweden 2000 2000 c,dc,d 25.025.0 3.63.6 9.19.1 14.014.0 17.617.6 22.722.7 36.636.6 22.222.2

123123 JapanJapan 1993 1993 c,dc,d 24.924.9 4.84.8 10.610.6 14.214.2 17.617.6 22.022.0 35.735.7 21.721.7

124124 DenmarkDenmark 1997 1997 c,dc,d 24.724.7 2.62.6 8.38.3 14.714.7 18.218.2 22.922.9 35.835.8 21.321.3

C. Policies Affecting C. Policies Affecting PovertyPoverty

C. Policies Affecting PovertyC. Policies Affecting Poverty

Four groups of policy:Four groups of policy:

1.1. Macroeconomic policyMacroeconomic policy

2.2. Sectoral policySectoral policy

3.3. Institutional development policyInstitutional development policy

4.4. Specific, target-group oriented policySpecific, target-group oriented policy

C. Policies Affecting PovertyC. Policies Affecting Poverty

1.1. Macroeconomic policy:Macroeconomic policy: Overall economic growth reducing Overall economic growth reducing

povertypoverty Export, FDI, tourismExport, FDI, tourism Fiscal policy through progressive tax Fiscal policy through progressive tax

and poverty-target spendingand poverty-target spending

C. Policies Affecting PovertyC. Policies Affecting Poverty

2.2. Sectoral policySectoral policy Agricultural policy: credit, R&D, price Agricultural policy: credit, R&D, price

support, land reformsupport, land reform Industrial policy: export promotion, Industrial policy: export promotion,

rural industrializationrural industrialization Education policyEducation policy

C. Policies Affecting PovertyC. Policies Affecting Poverty

3.3. Institutional development policyInstitutional development policy Rural community developmentRural community development Administrative reformAdministrative reform

C. Policies Affecting PovertyC. Policies Affecting Poverty

4.4. Specific, target-group oriented policySpecific, target-group oriented policy Water development in target villagesWater development in target villages Social welfare for the ultra poorSocial welfare for the ultra poor

Past Policies Affecting Poverty Past Policies Affecting Poverty in Thailandin Thailand

The Rural Job Creation ProgramThe Rural Job Creation Program

- Starting in 1975 for off-season - Starting in 1975 for off-season employment employment

- Biased towards non-poor farmers , - Biased towards non-poor farmers , but still useful.but still useful.

The poverty Eradication policies The poverty Eradication policies (1982-86)(1982-86)- - Cover over 12,000 villages in 38 provincesCover over 12,000 villages in 38 provinces

- Provision of government services.- Provision of government services.- Increase self-reliance, and people - Increase self-reliance, and people participation.participation.- Basic and low – Cost technologies.- Basic and low – Cost technologies.- Four ministries : Interior, Health, Agri., - Four ministries : Interior, Health, Agri., and Educationand Education- NESDB : Poverty declined by half of - NESDB : Poverty declined by half of villagesvillages

The Green Esarn Project (1987)The Green Esarn Project (1987)

- Natural resource development- Natural resource development

- Income and employment- Income and employment

- Basic needs , mainly water supply- Basic needs , mainly water supply Rural credit through BAACRural credit through BAAC

- Reducing the role of unorganized - Reducing the role of unorganized creditors from 90% to 50% during 1997-87.creditors from 90% to 50% during 1997-87.

- Most benefit to middle-income farmers- Most benefit to middle-income farmers

- Some trickle-down effect to the poor- Some trickle-down effect to the poor

Infrastructure investment , particularly Infrastructure investment , particularly transporttransport

market access for agricultural productsmarket access for agricultural products Industrial policyIndustrial policy

- Bias towards industry , against agriculture- Bias towards industry , against agriculture

- BOI privileges for capital-intensive - BOI privileges for capital-intensive industriesindustries

Trade policyTrade policy

- Tariff , and import substitution- Tariff , and import substitution

- Export promotion- Export promotion

Exchange rate policyExchange rate policyOver-valuation of the baht Over-valuation of the baht lower lower

terms of trade for agricultureterms of trade for agriculture

Agriculture pricing policyAgriculture pricing policy

- Rice premium and export taxes- Rice premium and export taxes

- Price support and subsidies- Price support and subsidies

Other Policies for Poverty ReductionOther Policies for Poverty Reduction

- Agriculture productivity promotion- Agriculture productivity promotion

- Promotion of industries in rural/provincial - Promotion of industries in rural/provincial areasareas

- Training and education to increase labor - Training and education to increase labor skillsskills

- Social services (health , welfare)- Social services (health , welfare)

- Macroeconomic management for - Macroeconomic management for sustainable economic growthsustainable economic growth

ThaksinGovernmentInitiatives

• Claimed Output:

– 6,932 products, with quality improvement & guarantee.

– Sales increased from 24.5 million baht in 2001 to 42.93 million baht in 2003

– Job creation in 26,000 communities;

• Outcome: double household income

One Tambon One Product (OTOP)

• Beneficiaries: (claimed output)

– Debt moratorium: 2.31 million persons, 53,000 million baht;

– Debt forgiveness (Hair cut and interest reduction): 4.13 million persons;

– Rehabilitation & restructuring to improve production: 0.85 million persons;

• Outcome: income increased by 10,185 baht/year/household

Debt Moratorium & Debt forgiveness

• Beneficiaries: (claimed output)

– 13.9 million persons;

– Loan: 168 billion baht

• Outcome:

– Reducing informal sector loan that charged extremely high interest rate;

– Income increased 5,900

baht/year/ household

Village & Community Funds

• A concept (philosophy) proposed by the King

• 3 middle paths + 2 conditions

Middle paths: moderation, rationality (reasonableness), and self-immunity

Conditions: knowledge and morality

Sufficiency Economy