Always be Prepared: Lessons Learned From Risk‐Coping Strategies of Thai Households in the Wake of Two Major Economic Crises

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ABSTRACTThis paper aimed to comparatively examine the function of three risk‐coping strategies, namely savings, borrowings, and work‐hour adjustments, during two major economic crises in Thailand. Using the Socioeconomic Survey (SES) collected by the National Statistical Office (NSO) in Thailand, we examined data from the 1998 financial crisis and the 2021 COVID‐19 outbreak. The empirical methods were the two‐step estimation method and the income decomposition technique, with an emphasis on correcting an endogeneity problem with an instrumental variable approach. The results showed that risk‐coping strategies respond more strongly to income shocks during crisis periods than in noncrisis periods. Borrowing was the most important risk‐coping strategy, followed by work‐hour adjustments employed by Thai households to smooth their consumption against transitory income shocks caused by unemployment in crisis and noncrisis periods. On the contrary, we found that Thai households are less prudent.