Economic incentives and comparative advantage of soybean production in Thailand
1995
Premchai Gatesumpao
This study is conducted with the specific objectives to analyze the comparative advantage of soybean productions including soybean grain, oil and meal, and to determine to effect of the government policies on economic incentives in order to find out the feasible suggestions for the appropriate government policies. The results show that government intervention has motivated incentives to increase domestic production of soybean grain, oil and meal. The nominal protection coefficient on output (NPCO) and the nominal protection coefficient on tradable input (NPCI) are found greater than one, indicating that government policies are protecting at two levels of soybean production both output and input. On the other hand, the effective rate of protection (ERP) for the soybean grain, the soybean oil and meal and the subsidy ratio to producers (SRP) are positive. This clearly displays the net economic incentive of existing government policies give to entire soybean productions system. For all soybean products, however the domestic resource cost ratio (DRC) reveal some degree of comparative disadvantage. Because the domestic resource cost ratio of each soybean product is greater than one. This means that soybean production utilizers more than one baht for domestic resources to earn one baht of net foreign exchange at social prices. As a result, all soybean products are given policy incentive despite their comparative disadvantage in production. For better resource allocation, government shoud therefore slightly decrease incentives and at the same time improve appropriate technology and productivity to increase comparative advantage of soybean production. In general, economic incentive policy and comparative advantage in production should be suggested with rationale of their own.
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