Rural income dynamics and poverty reduction in Thai villages from 1987 to 2004

This article aims to examine the factors contributing to the increase in household income and the corresponding reduction in poverty in rural Thai villages from 1987 to 2004 by employing household panel data. It is found that there has been a significant structural shift of household income away from farm to nonfarm income sources, as well as a reduction in the income gap and the difference in poverty incidence between favorable and unfavorable regions. Such decreases in poverty and its regional gap have been associated with the declining importance of income accrued to farm land, measured by farm size and the availability of irrigation, and with the increasing importance of human capital, measured by the proportion of working members who have graduated from post lower secondary schools. Such findings indicate that the success in rural poverty reduction in Thailand has resulted from the development of the rural nonfarm sector coupled with the improvement of the schooling levels of the rural population.