Does Entrepreneurship Bring an Equal Society and Alleviate Poverty? Evidence from Thailand

AbstractThe Global Entrepreneurship Monitor (GEM) Report 2007 records that Thailand has a remarkably high entrepreneurial activity, even if compared to Japan or the United States. Many studies, including Schumpeter (1934) [1] emphasised the role of entrepreneurship in economic growth and development of a country. Entrepreneurs, characterised by their attitudes to be imaginative, innovative, authoritative, and risk-taking, drive innovation and technological change in the economy, which are crucial in economic growth and development and lead to higher income of the population. On the other hand, entrepreneurship has been considered to associate with higher inequality because the risk embodied in it. Although, during 1990 to 2002 poverty reduction in Thailand has been claimed to be success but income inequality became higher. This raise the question that does entrepreneurship have any impact on reduction of poverty and inequality in Thailand? Therefore, the aim of this paper is to study the impact of entrepreneurship in income inequality and poverty of Thailand. Towards this ends, the analysis on the impact of entrepreneurship on income of the poor, income inequality and poverty are carried out by performing regression analysis. This study uses data that are disaggregated into 76 provinces in Thailand, obtained from official government documents. The regression models follows Beck et al (2005) [2], by running regression based on cross sectional data. Results suggest that entrepreneurship, measured as the number of new business establishment, has a significant negative effect on growth of Gini-coefficient and the headcount index but there is no significant effect on income of the poor. In addition, to confirm these relationships, we expand the data by using 76 provinces of Thailand from 1995 to 2008, and are estimated by three different methods – pooled OLS, random effects and fixed effects. Based on the first two methods, we found that entrepreneurship does not have a significant impact on income of the poor, income inequality and number of poverty. However, the result of the Hausman test necessitates a re-estimation of the model by the fixed effects method. Using the fixed effects methods, our results indicate that entrepreneurship is insignificant. We take this result as evidence that entrepreneurship plays little or no role in income distribution and poverty of Thailand