Trends and drivers of income inequality in the Philippines, Thailand, and Viet Nam since the early 2000s: A decomposition analysis

Abstract

Income inequality has moderated in the Philippines, Thailand, and Viet Nam, three middle income countries in Southeast Asia, over the past two decades, with multiple factors at play. In each country, wage, nonfarm business income, and overseas remittance concentrations declined as less well-off households increasingly engaged in better-paying activities. In Thailand and Viet Nam, transfer incomes became more pro-poor and better targeted. Major contributors to lower income inequality also included a narrowing in regional disparity and a reduction in the urban-rural income gap, and, in the Philippines and Thailand, a fall in the education premium. This recent trend of moderating income inequality might be the combined outcome of rising income opportunities generated by structural transformation and government policies promoting social inclusion. Nonetheless, income inequality remains high, especially in the Philippines and Thailand. More policy efforts are needed to make growth more inclusive.