Juthathip Jongwanich

IEA: Can you tell us a little bit about your life story, what got you interested in economics, and how you decided to pursue an academic career?

Juthathip: What got me interested in economics was the 1996-97 Asian financial crisis, during which Thailand and other Asian countries faced economic turmoil. Throughout that period, various arguments and debates from prominent economists have emerged, for e.g., the self-fulfilling crisis, economic vulnerability, explicit or implicit guarantee from government and mismatches on balance sheet, and real exchange rate disequilibrium. Many policies had also been introduced in these countries to cope with the crisis, including those initiated by the IMF. The economy, especially investment, has plunged and in Thailand the private investment has not yet returned to the satisfactory level. All of these got me interested in economics.

My interest was geared up to another level when I pursued my PhD at ANU, where I had gained immensely. For my thesis, I built theoretical and empirical models, containing relationships between tradable (diving into agriculture and manufacturing) and non-tradable sectors (for both demand and production) to verify whether choices of exchange rate regimes and capital opening matters in leading up to real exchange rate appreciation and crisis. I worked as an RA for my supervisor on a project relevant to trade protection in Southeast Asian countries, Vietnam and Thailand in particular. Two papers and one book were published from my work.

My interest in economic issues, especially international economics, passion to do research, my interest in contributing to developing next-generation economists and my appreciation for flexibility drive me to pursue an academic career.

IEA: In your recent work you study the relationship between export diversification, export margins and economic growth at industry level in Thailand. Can you briefly summarize your findings? What made you interested in this topic?

Juthathip: I have been interested in this topic because there has been a growing concern about the economic outcome of the export-led growth model pursued in Thailand since the mid-1980s, particularly unprecedented outcomes in terms of economic downturn (and fluctuation) from several external shocks. However, export sector has still been crucial in Thailand and during the COVID-19 pandemic, the export sector plays the key role in supporting the country’s economic recovery. To pursue export-driven growth strategies, export diversification and upgrading has become more crucial and has been a compromise solution for a country to rely on the export sector. Thai government has emphasized export diversification and upgrading, as in other countries pursuing export-led growth strategy. This is also a part of Thailand 4.0 (industry 4.0), policy initiated by the government in 2017.

Concerning export diversification, the diversification can be contributed by both intensive and extensive margins, and both margins could have different impacts on economic growth. Note that in the study, intensive margin refers to expanding existing products (traditional products) while extensive margins refer to expanding exports through introducing new products and/or developing new trading partners. Policy emphasis tends to gear towards more extensive margins (new products) as it is believed that it could generate higher growth and productivity. However, in literature, how these two margins contribute to economic growth is debatable. Imbs and Wacziarg, 2003; Cadot et.al., 2011 and Mohan, 2016 also show the non- monotone pattern of export diversification and per capita income with initial diversification and subsequent re-specialization when income reaches a certain level. This could to some certain extent imply that the role of export diversification would become less relevant for growth when countries become richer and produce more complex products.

While most previous studies, which analyze relationships between export diversification, margins and growth, using cross-country analysis, I think it would be more insightful to employ industry-level analysis. To a certain extent, it would be more in line with firm heterogeneity emphasized in a recent trade theory (Note that with data limitation, I could not employ firm-level data in analyzing intensive and extensive margins according to definition mentioned earlier).

The brief findings are as follows:

(1) Industrial heterogeneity is important in analysing the impact of export diversification and export margins on economic growth.
(2) Export diversification helps boost economic growth only in some industries, for example electronics, automotive and chemicals, plastics and rubber, while in processed food and textiles and apparel, specialization matters in promoting growth.
(3) The expansion of intensive margin still plays an important role in boosting economic growth in key industries, including electronics, automotive, processed food.
(4) The extensive margin (new products) is found to be significant in promoting economic growth only in processed food and textiles and apparel, while the extensive margin in terms of new market destinations reveal a significance in boosting growth in the electronics sector.

Such findings point to the danger of overemphasizing the extensive margin, especially in terms of new products, in promoting economic growth in developing countries like Thailand as our study shows that the intensive margin still plays an important role in promoting economic growth in many industries. From the study, I think the extensive margin should be promoted simultaneously with improving traditional products. Firms could upgrade their traditional products, especially through process innovation. Expanding the new market destinations of traditional products is another way to promote economic growth and redressing the volatility arising from the exogenous shocks associated with expansion in the intensive margin. Excess profit as a result of enhancing competitiveness in traditional products could form the core internal financial resource to drive ventures into new products, especially in high value-added exports, new markets or both.