Thailand and the Middle-Income Trap: An Analysis from the Global Value Chain Perspective

Abstract

The study provides a critical analysis through the lens of the global value chain (GVC) framework with empirical data on value-added trade to explain Thailand's middle-income trap (MIT) by matching GVC data at the firm, industry, and country levels with the economic development trajectory. The results show that participation in GVCs contributes to initial industrialisation and economic development. However, it does not guarantee subsequent technological upgrading, as there is a risk of falling into the middle-income technology trap (MITT). Thailand is highly dependent on passive technology and specialisation imposed by headquartered countries, trapping the country in the middle of value chains with limited knowledge and technology transfer. As a result, Thailand has fallen into the MITT, where it cannot sustain growth and catch up with the more innovative advanced economies, leading to it falling into the MIT. To escape both traps, the government can consider policies that address inadequate knowledge and technology transfer and the lack of capacity of local firms.