Title

Narrowing income disparities as policy priority for inclusive economic growth: An applied computable general equilibrium (CGE) approach on urban and non-urban industries in Myanmar

Date of Award

2016

Degree Type

Thesis

Degree Name

Doctor of Philosophy

School

School of Business and Law

First Advisor

Associate Professor Zhaoyong Zhang

Second Advisor

Professor Pierre Horwitz

Third Advisor

Professor Hadrian G. Djajadikerta

Abstract

Since 2011, Myanmar has progressively liberalized its international trade and investment policies, resulting in both opportunities and challenges. The rising inequality between urban and non-urban areas, and within urban areas, has become a growing concern for policy makers, in addition to the existing and pervasive poverty issue. This research considers whether the support of a more skilled premium in labour supply, through investment in the human capital policy, can significantly improvement current developmental constraints. The research also investigates what policies Myanmar must integrate alongside its trade and investment liberalization policies to ensure inclusive growth. To highlight the concerns of this research, the concept of Computable General Equilibrium (CGE) and the ORANI_G single country model are applied to test a sample of 57 sectors, under 15 different industries, by using the GEMPack software.

The results obtained are justified and presented under four classifications of urban and non-urban industries, and confirm that by integrating Fritzen’s proposed “egalitarian, high-quality educational systems” into Myanmar’s current situation, new employment opportunities would increase by 684.75%: 465.67% from urban industries and 219.08% from non-urban industries. Household purchasing power would also grow noticeably: by 149.93% in urban households, 61.78% in rural households, 13.01% in regional households and 28.24% in households from supporting families. The overall capacity of Myanmar’s labour force and a household’s purchasing power would be better, and the income inequality gap within urban and non-urban could be reduced to some extent. However, urban and non-urban income inequality gap could still be existed, over a period of 2 years.

This study finds that, in an economy driven by human capital, Myanmar’s five service sectors, four primary production sectors, 16 value-added sectors (made up of 6 labour-intensive sectors and 10 capital-intensive sectors) could increase production capacity and establish stronger market competitiveness. Competitive output prices would establish market competition, both in domestic and export markets, and thus, the current account deficit problem would also be eased. This finding highlights the viability of shifting Myanmar’s economic structure from agriculture-based industries and primary-product industries to knowledge- and skill-based industries and capital-based industries. Policy improvement brings about an increase in employment opportunities by 74.69% from urban industries and by 25.31% from non-urban industries. If Myanmar policy-makers could intervene with other policies that control rising land and capital prices, as well as with financial and monetary policies that control the inflation rate, an additional five urban sectors and two regional industries could grow in the short-term with a 99.66% increase in employment: 72.69% from urban industries and 26.97% from non-urban industries. Overall, if Myanmar policy-makers implement education alongside trade and investment liberalization policy and financial and monetary policy, labour-intensive production industries and primary-production industries will improve, as well as the skilled and capital-intensive industries. Such economic growth could equal East Asia’s rate of development.

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