Roles of public and private captital on labor productivity in Thailand

Abstract

This study aims to calculate the value of labor productivity of Thailand during 1970-2003 and investigates the role of public and private capital to the labor productivity via production function which is ameliorated by human capital with catch-up technology and technological approach. The data used are classified into 3 sectors: agriculture, industry and service. It is found that during 1970 to 2003 the compound growth rate of agricultural, industrial and service sectors increased approximately 2.10, 0.91, and 0.64, sequently. For the whole economy, the grwoth of labor productivity of the whole economy was well-nigh 3.60. The whole economy and the industrial sector produce with the Hicks neutrality approach that accounts human capital with catch-up technology as an input factor. On the other hand, the agricultural sector and the service sector produces with the Harrod neutrality characteristic. The private capital always has a great positive effect on the labor productivity. In contrast, the public capital has a negative effect on labor productivity except the agricultural sector which is positive but insignificant. Heance, the private capital contributes the average percentage change in labor productivity more than the public capital does. For the whole economy, holding the other input constant, a 1 percentage increase in the private capital makes 1.537 percentage change in labor productivity greater than public capital. The similar aspect is found in the agricultural, industrial and service sector as 0.909, 1.237 and 1.284 sequently. The implication of the overall estimation indicates that the government investment has less effect to labor productivity than private sector. Therefore, The government should provide the context and promotion that encourage the private sector to invest and sustained upgrade. It should emphasize on improving its quality rather than many projects such as reducing the overlapping works between agencies through a clear division of role and responsibility between these agencies, simplified supporting schemes and reduce bureaucracy, and enhancing labor news or articles about skill promotion. The agricultural sector and the service sector, which produce with Harrod neutrality, should be focused on escalating the quality of human capital as well as eradicating the impediment of transferring technology in order to decrease the negative effect to the labor productivity. It is no need to favor any particular input factor for industrial sector.