Responding to Recession: Evidence from Thailand

World GDP fell by 0.6% in 2009. Buffeted by the shocks created by the great recession, the Thai economy contracted by 2.3% in that year. In this paper we ask how large the shocks to the Thai economy in 2008-09 were, how Thai households were affected by the shocks, and the extent to which the government’s response cushioned those effects for different groups of households. Following the three-layer approach recommended by Bourguignon and Pereira da Silva (2003), we first quantify the magnitude of the reductions in exports (broken down by group) and tourism, by comparing the actual values with a plausible counterfactual. We estimate that from October 2008 through September 2009, tourist arrivals were 12% below trend, and the dollar value of exports fell by 16%. In the second layer we use a SAM multiplier analysis (following Round 2003) to measure the direct, indirect, and induced effects of the exogenous shocks to tourism and exports, using an updated 81-sector Social Accounting Matrix that has 61 “industrial” sectors. This allows us to simulate the effects of the shocks on the income in each sector. For the third layer we map the sectoral changes in incomes to household incomes, using data from the Socio-Economic Surveys, which sample about 3,500 households every month. This allows us to measure the effects of the shocks on the distribution of income, as well as along other dimensions, including region and gender. ...