Essay on Labour Supply and Policy Microsimulation in a Developing Country

This thesis contains three empirical essays. It is mainly motivated by the economic situations (low economic growth and high economic inequality) of many developing countries including Thailand. Nonetheless, the labour supply literature regarding developing countries necessary to address these issues is very limited. The first empirical chapter investigates the determinants of labour supply at the extensive margin in the formal labour market of Thailand as a developing country. This chapter applies the structural binary probit to model behaviour of labour supply participation using the Household Socio-Economic Survey (HSES) of Thailand covering 2009, 2011, 2013, and 2015. The key focuses are the role of the informal sector, the effect of income restructure policies in 2012, and the impact of debt constraints on labour force participation. The results show that the informal sector has a negative effect on labour supply participation; the set of income restructure policies affects labour supply at the extensive margin negatively; and the amount of debts encourages people to participate in the labour market. The subsequent chapter studies individual and household labour supply using a structural discrete hours approach. This essay adopts Thailand HSES covering 2009, 2011, 2013, and 2015 to estimate different model specifications based on the degrees of model flexibility and applies five criteria to select the preferred model at individual and household level. The results suggest that the most flexible model are preferred for individual and family labour supply. The final essay focuses on applying the microsimulation technique to explore the effects of three different policy reforms including the perfect compliance of the national minimum wage, increases in non-transferable allowances, and a proposed personal income tax package. This chapter applies Thailand HSES in 2013 and 2015. The results of the first policy suggest that the minimum wage with perfect compliance helps promote household income at the bottom end of the distribution; the policy therefore ameliorates the poverty and income inequality problems. Increases in non-transferable allowances as implemented in 2017 marginally impact labour supply response as well as gross and disposable incomes; however, the reform decreases the tax burden significantly. The results of the final simulation (the proposed tax package) reveal that it causes negative effects on labour supply and financial factors overall. Introducing this policy intensifies poverty and income inequality problems