Entrepreneurs hold the key to income growth in developing economies

By gathering information on household incomes, economists hope to develop the data they need to propose policy solutions that will help boost incomes in emerging economies. Click here for more information.

Townsend’s work in Thailand, in which he examined individual decisions in the home and determined the relationship of those choices to economic changes on a national level, spurred the Enterprise Initiative. Thailand is a prototypical developing Asian economy with a strong culture and history of entrepreneurial activity.

Townsend’s research integrates survey and geographic data from government ministries with his own longitudinal survey data. The Townsend Thai data comes from the Thai Family Research Project, which Townsend helped establish and has co-directed for more than 10 years. That project is an ongoing longitudinal study of nearly 3,000 households in Thailand. Townsend’s upcoming book, Financial Systems in Developing Economies: Growth, Inequality, and Policy Evaluation in Thailand, features important new findings on the relationship between individuals’ choices and entrepreneurial behavior and overall economic growth, including:

Poverty has decreased by more than 60% in the past 35 years, with dramatic regional patterns of growth, first concentrating around urban centers, and later in more remote areas. However, inequality persists.

Households have made persistent transitions from rice farming to other occupations, including business. Since profits from business are high relative to wage labor, and early on there were few households in business, this transition is associated with an increase in per-capita income and a growth in inequality. However, this income differential has decreased as demand from industrialization eventually increased the wages of unskilled labor.