Abstract
In this paper, we seek to verify the hypothesis that expanding production of the bio-fuel industry is geographically concentrated in Thailand will cause the income of farm households producing raw materials for bio-fuels to increase and cause a disparity in income for such raw materials-producing farm households and farm households producing agricultural products other than raw materials for bio-fuels to decline. In order to verify this hypothesis, we used the CGE model developed for the purpose of analyzing the bio-fuel industry. However, the CGE model is configured to divide the production activities of agriculture, forestry and fisheries industry into only three types of production activities, and hence is not capable of determining impacts on production activities for individual items such as paddy rice, corn, cassava, oil palm fruit, sugarcane, rubber, livestock, etc. For this reason, we focus on the impacts of changes in such individual production activities on the income of farmers and farm households by a multiplier analysis applying a SAM-IO linked model.
Our results show that implementing tax breaks for bio-fuel product expansion increases the overall income of farmers in Thailand, and decreases income disparity between farmer households and non-farmer households. However, enforcing tax breaks for bio-fuel does not necessarily achieve a minimization of income disparity between farmers. If enforced too aggressively, the income disparity between farmers may rather be enlarged. Therefore, we conclude that setting the rate of a tax break requires carefully considered policies.
JEL Classification: R13, R38, F17, C68
