Wage-led, profit-led, or debt-led?: income distribution and economic growth in Thailand

Thailand is currently grappling with high household debt and economic stagnation, which may stem from insufficient personal income. The impact of debt on the economy is twofold, potentially stimulating consumption while also creating a risk of economic instability. Conversely, an increase in individual income, mainly from wages, could potentially reduce investment as investors or capitalists may incur higher production costs. The primary objective of this research is to determine the main driver of the Thai economy—whether it is labor, capital, or household debt. Utilizing a demand regime analysis framework, the study specifically investigates whether an increase in labor share stimulates consumption sufficiently to outweigh any negative impact on investment, which would indicate a wage-led demand regime. Alternatively, the research considers whether a profit-led demand regime prevails, with capital share driving the economy.The research concludes that Thailand's demand regime is profit-led, meaning investment exerts a greater influence on the Thai economy than consumption, and that household debt does not encourage consumption and actually reduces investment. Consequently, the study recommends addressing the household debt issue as a priority.