Multiple Equilibria of Corruption and Biased Technological Progress: State Capture and Rent-Seeking in Thailand Underdevelopment

Abstract

This article analyzes the ongoing problem of corruption’s impact on capital accumulation in Thailand. Economic growth resulting from capital accumulation is influenced by corruption in the form of state capture and rent-seeking, which affect the pattern of technological progress. Growth and income distribution in a wellfunctioning economy are expected to feature neutral technological progress, enhancing efficiency in both capital and labor at the same rate. Neutral technological progress provides balanced returns on production for both sides and positively impacts the overall system. However, empirical evidence suggests that Thailand’s capital accumulation exhibits characteristics of biased technological progress, leading to a decrease in capital/output ratio, the profit rate, and the divergence between wage and labor productivity, and resulting in an imbalanced distribution of income between capital and labor. Capital accumulates in a manner aligned with cumulative causation and low growth, hampering the development of labor and capital productivity. Corruption of rent-seeking and state-capture in Thailand creates extreme inequality and undermines stability in both the market and politics. This study provides a deep analysis of Thailand’s path of capital accumulation that is characterized by biased technological progress in the context of corruption.