recent development in income inequality in thailand · recent development in income inequality in...
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Recent Development in Income Inequality in Thailand
V.Vanitcharearnthum
Chulalongkorn Business School
September 21, 2015
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Introduction Agenda
Income inequality: measurement
Literature Review
Pareto Distribution
Top income share
Evidences from SESEvidences from tax return
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Introduction Agenda
Declining Poverty
(millions) 22.5
12.0
3.0
1988 1999 2010
Figure : Number of poor at $2/day (PPP)
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Introduction Agenda
Improving Equality
96 98 00 02 04 06 07 09 11
.4
.45
.5
.55
.596
Figure : Gini Coefficient: Whole Kingdom
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Introduction Agenda
96 98 00 02 04 06 07 09 11
.4
.45
.5
.54 Bangkok
Central
North
Northeast
Figure : Gini Coefficients: By Regions
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Literature Review Thailand
Recent Studies
Kobsak (2013)
Kilenthong (2014)
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Literature Review International Evidences
Review Literature
Feenberg and Poterba (NBER 19)
Piketty(JPE 2003)
Atkinson (2005)
Piketty and Saez (QJE 2003)
Atkinson, Piketty and Saez (JEL 2011)
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Methodology Pareto Distribution
Methodology
Pareto distribution
SES: HH member data
Estimating Pareto parameters
Tax units amd national income
Preliminary result
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Methodology Pareto Distribution
Pareto(1896, 1897)
Vilfrado Pareto considered data for England, a number of Italiancities, several German states, Paris and Peru.
Plotting the cumulative distributions of income for these countries ondouble logarithmic paper,
Pareto claimed that in each case the result was a straight line withabout the same slope.
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Methodology Pareto Distribution
logN = A− α log y
logNy≥k
log y
England 1879-80
Italian Towns
k
Figure : Pareto’s Law
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Methodology Pareto Distribution
logN = A− αH log y
logNy≥k
log yk
Figure : Pareto’s Law
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Methodology Pareto Distribution
logN = A− αL log y
logNy≥k
log yk
Figure : Pareto’s Law
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Methodology Pareto Distribution
The Pareto law for top incomes is given by the following cumulativedistribution function, F (y), that specifies the probability that a randomlychosen taxpayer’s income y is greater than x is
Pr(y > x) = 1 − F (x) =
(k
x
)αwhere k is the minimum income that the Pareto distribution applies to,and α is the exponent that determines the shape of the distribution.
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Methodology Pareto Distribution
β
Let y∗(y) be an average income of individuals with income above y .Under the Pareto distribution,
y∗(y) = β · y
where β = αα−1
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Methodology Pareto Distribution
If β = 2, the average income of individuals with income above1,000,000 bahts is 2,000,000 bahts.
A higher β means a fatter upper tail of the distribution
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Part I
HH Survey
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SES Results
SES 2004
Use HH member data: in rec 2 (including info about education, workstatus , etc.)
Also rec 13-15 (income from various occupations)
In 2004 survey, there are
Wage incomeNon-farm incomeFarm incomeProperty incomeTransfersOther income
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SES Results
SES 2009 & 2013
Total income of HH member includes
Wage incomeRevenue and operating cost of businessMoney received from agriculture and cost
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SES Results
2004 2009 2013
k .2,530.83 30,728.7 41,984α 1.647 1.548 1.693β 2.55 2.825 2.45y∗(yp90) 313,435.8 384,200 401,681yp99 493,820.52 602,523.53 640,977.1yp99.9 2,011,255.68 2,679,049.69 2,502,026.2
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SES Results
Top income share
0.11
0.123
Top 1%
0.055
Top .1%0.045
2004 2009 2013
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SES Results
Fraction of BA or Above in Top income
0.55
0.63
Top 1 %
0.32
Top .1 %
0.4
2004 2009 2013
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SES Results
2004:Top 1 % Decomposition
36.7 %
Wage
41.8 %
Nonfarm 9.1 %
Farm
2.6 %
Property
7.9 %
Transfer
1.8 %Other
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SES Results
2009:Top 1 % Decomposition
36.5 %
Wage
52.3 %
Business profit
1.12 %
Agriculture profit
10.08 %
Other
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SES Results
2013:Top 1 % Decomposition
68.8 %
Wage
0.55 %
Business profit
30.65 %
Agriculture profit
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SES Results
Sectors in Top 1%
2004 2009 2013
2
3
4
5
6
7
2.7
2.1
4.7
6.8 6.8
5.2
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SES Results
Sectors in Top .1%
2004 2009 2013
2
4
6
2.7
2.1
4.7
7.2 7.4
3.45
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SES Results
2009 2013
Highest Income 33,666,640 17,123,600Region Central SouthEducation Gen Ed BAIndustry Wholesale and retail, Growing of oleaginous fruits
repairing motor vehiclesmotorcycles/HH goods
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Part II
Tax Returns Data
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Estimation Results
α
α
2004 2005 2006 2007 2008 2009
1.19
1.33
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Estimation Results
β
β6.22
4.045
2004 2005 2006 2007 2008 2009
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Estimation Results
Threshold Income
Top 1% Top 0.1%
2004 1,152,089.4 7,228,185.02005 1,115,732.9 7,706,655.52006 1,314,671.8 7,772,404.12007 1,301,830.4 7,367,842.52008 1,340,195.0 7,644,198.02009 1,341,256.2 7,717,556.8
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Top Income Shares
Let yx% be the threshold income at the xth percentile.
Under Pareto distribution, we know that the average income aboveyx% is
y∗(yx%) = β · yx%We computed y∗(y1%) and y∗(y.1%)
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Top Income Shares
y ∗(yx%)
Top 1% Top .1%
2004 5,690,541 35,702,3342005 6,943,201 47,958,4862006 5,759,486 34,050,3652007 5,266,004 29,803,4922008 5,496,295 31,349,7452009 5,587,824 32,152,211
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Top Income Shares 2 Methods
Tax Base (I)
Use 1% and 0.1% of tax filers to multiply with y∗(yx%)
in order to get the total income in the top 1% and .1% bracket
Then divide those numbers by the net national income in thecorresponding year
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Top Income Shares 2 Methods
Top 1 %
Top .1%
2004 2005 2006 2007 2008 2009
0.0606
0.0343
0.076
0.0527
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Top Income Shares 2 Methods
Tax base (II)
We followed Piketty and Saez (2003) by using tax units instead of taxfilers
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Top Income Shares 2 Methods
Top 1 %
Top .1%
2004 2005 2006 2007 2008 2009
0.4118
0.289
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