Urban-rural inequality in Thailand: Differences in characteristics or returns?

Abstract

This paper examined urban-rural inequality in Thailand using three socioeconomic surveys from 1988, 1998, and 2007. Household consumption expenditure was used as a welfare measure. The quantile regression technique was employed to investigate urban-rural inequality in different quantiles. The Machado-Mata decomposition approach was then applied to decompose the urban-rural gap into two components: Differences were identified between urban and rural household characteristics and in the returns to household characteristics. The decomposition results suggested that in 1988, the urban-rural gap was primarily due to the return differential between urban and rural households. In 1998, the top urban households were better off due to superior characteristics whereas in the lowest quantiles, the gap was predominantly due to differences in the returns to characteristics. In 2007, urban households were better off than their rural counterparts because of superior endowments. Improving rural household endowment such as educational attainment would potentially reduce the gap between the rural and urban sectors.