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Published by Pat Chirapant
Industrial development in Thailand during the 1980s and 1990s was accompanied by the uneven distribution of income and the location of factories. Developments in New Economic Geography and the unique technique of nesting a Heckscher-Ohlin model within an increasing returns to scale model by Davis & Weinstein, allows for investigation on the factors of the location of industry. There is support for the existence of economic geography eects in as many as 56 percent of Thai industries. This home market effect provides a good explanation to the rapid growth and strengthening of the Central region of Thailand as the major growth area of production in the country and Southeast Asia.
Industrial development in Thailand during the 1980s and 1990s was accompanied by the uneven distribution of income and the location of factories. Developments in New Economic Geography and the unique technique of nesting a Heckscher-Ohlin model within an increasing returns to scale model by Davis & Weinstein, allows for investigation on the factors of the location of industry. There is support for the existence of economic geography eects in as many as 56 percent of Thai industries. This home market effect provides a good explanation to the rapid growth and strengthening of the Central region of Thailand as the major growth area of production in the country and Southeast Asia.

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Published by: Pat Chirapant on Oct 16, 2012
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University of Warwick
Understanding Thailand’s Industrial Development in the Lenses of New Economic Geography
A Dissertation Submitted in Partial Fulfilmentof the Requirements for the Degree of 
Masters of Science
in Economicsby Bhatara
Chirapant
Dr. Nicholas CraftsDepartment of EconomicsSeptember 2012
Abstract
Industrial development in Thailand during the 1980s and 1990s was accompaniedby the uneven distribution of income and the location of factories. Developmentsin New Economic Geography and the unique technique of nesting a Heckscher-Ohlin model within an increasing returns to scale model by Davis & Weinstein,allows for investigation on the factors of the location of industry. There is supportfor the existence of economic geography effects in as many as 56 percent of Thaiindustries. This home market effect provides a good explanation to the rapid growthand strengthening of the Central region of Thailand as the major growth area of production in the country and Southeast Asia.
I would like to thank Dr. Nicholas Crafts for the supervision of this research and the thoughtfulsuggestions and critique. I have benefited from comments from Dr. Joan R. Ros´es, Apisek Pansuwan,Fredy A. Gamboa-Estrada, Thomas Swenson, Paveena Amornkul, and Timothy Gaw.
©
Bhatara Chirapant, 2012. All rights reserved. This dissertation may not be cited, reproduced, ordistributed in whole or part without the express written permission of the author.
 
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Authors Preface
At the end of my undergraduate in Economics in Victoria, I had thought of applyinginto an Urban Planning or Development Master’s program to try to understand the fac-tors that could explain Bangkok’s primacy and the uneven development of industry inThailand. I chose Economics instead largely because it provided greater scope into thetopic area. My interest expanded greatly in the post-grad courses International TradeTheory and Economic History by Carlo Perroni, and Nicholas Crafts at Warwick.It is perhaps in this part of my Master’s that I found an interest that I could developinto a full-scale research project. The research by Donald R. Davis and David E. Wein-stein, followed by Joan R. Ros´es provide very insightful methods in capturing regionaldisparities within and across countries. The edge that the New Economic Geography(NEG) models have over basic classical trade models, is that they allow us to combinetwo fields of particularly important relevance to trade and production. I hope that myresearch effort may shed some light into the disparities in Thailand.For a nation of nearly 70 million inhabitants, Thailand deserves greater notice ineconomics. For this, I would like to draw attention to an enormous task being developedby Robert Townsend, who recently received the Frisch Medal from the
Econometrics Society 
for his joint research with Joe Kaboski on a Thai microfinance program. Inwriting their 2011 paper, they have provided Thailand with a series of data-collectiontools culminating to the Townsend Thai Project. This project will allow for refinedempirical work in applying New Economic Geography models to Thailand in the future,and perhaps, the methods of Davis and Weinstein can once again be applied then.
 
CONTENTS 
2
Contents
Author’s Preface. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 Birth and Import Substitution. . . . . . . . . . . . . . . . . . . . . . . . 52.2 Export Promotion and Intensification. . . . . . . . . . . . . . . . . . . . 7
3.1 Microfoundations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93.2 Idiosyncratic Demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.3 Empirical Specification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1 Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154.2 Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174.3 Results. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
A.1 Map of Thailand’s Industrial Network. . . . . . . . . . . . . . . . . . . . 28A.2 Map of Thailand’s Regions. . . . . . . . . . . . . . . . . . . . . . . . . . 29A.3 Bangkok Metropolitan Region. . . . . . . . . . . . . . . . . . . . . . . . . 30A.4 Summary Statistics of Thai Provinces. . . . . . . . . . . . . . . . . . . . 31A.5 GDP Growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34A.6 Regional GDP Growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34A.7 Regional Share of Output. . . . . . . . . . . . . . . . . . . . . . . . . . . 35A.8 Population by Region. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35A.9 Share of GDP Areas in Central Region. . . . . . . . . . . . . . . . . . . . 36A.10 Sectoral Share of Output and Employment. . . . . . . . . . . . . . . . . 37A.11 Sectoral Growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37A.12 Number of Industrial Estates in Thailand. . . . . . . . . . . . . . . . . . 38A.13 Growth Pole Cities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39A.14 Number of Persons Engaged in Manufacturing. . . . . . . . . . . . . . . 39A.15 Value of Investments in Manufacturing. . . . . . . . . . . . . . . . . . . . 40A.16 Number of Factories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40A.17 ISIC 2-digit Manufacturing Sectors In Thailand. . . . . . . . . . . . . . . 41A.18 Data and Construction of Variables. . . . . . . . . . . . . . . . . . . . . . 42

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