The Study of Economic Growth and Tourism Industry in Thailand

The purpose of this paper is to investigate the relationship between Thailand's tourism industry and its economic growth, while also examining the impact of government education spending, unemployment rates, tourism statistics, free visa policies, trade flow, and GDP. Data spanning 25 years (1995-2019) was collected. Results indicate that visa exemption policies play a crucial role in Thailand's economic growth, particularly in the tourism sector. A positive correlation between trade balance and GDP underscores the importance of maintaining favorable trade conditions for economic expansion. In conclusion, this research emphasizes the necessity of a holistic approach to foster both an effective education system and sustained economic growth in Thailand.

Introduction

The research aims to explore the intricate relationship between various factors—such as Thailand’s Gross Domestic Product (GDP), the tourism industry, education expenditure, unemployment rate, visa exemption policies, and trade flow—and their combined impact on Thailand’s economic development. GDP serves as a vital metric for evaluating a nation’s economic health and productivity, offering invaluable insights into economic scope and output assessments. By examining the interplay among these variables, the study endeavors to provide tailored insights specific to Thailand, highlighting their cumulative effects on overall economic progress.

A key focus is on the examination of Thailand’s tourism industry and its interconnectedness with visa exemption policies, which directly influence tourism by facilitating international visitation. Understanding the dynamics between these elements and Thailand’s GDP is crucial for policymakers and researchers to formulate effective strategies that enhance Thailand’s economic resilience and competitiveness in the global tourism market. Additionally, the research seeks to investigate the potential effects of legislation, such as visa exemption policies, on a nation’s GDP following significant events like the 2004 tsunami disaster.

Furthermore, the study aims to explore the impact of education expenditure on the labor market and unemployment rate, recognizing education as a fundamental factor in fostering economic progress. Analyzing how government spending on education influences Thailand’s unemployment rate provides insights into the efficacy of education-related investments and their implications for job creation and workforce skills enhancement.

In summary, the research objectives include studying the relationship between Thailand’s GDP and its tourism industry, investigating the individual and combined effects of various factors on Thailand’s GDP, exploring the impact of visa exemption policies on GDP, and disseminating research findings to relevant organizations within Thailand. By addressing these objectives, the study aims to equip policymakers with informed decision-making tools, facilitating efficient resource allocation and strategies that promote sustainable economic growth and employment opportunities in Thailand.

Literature Review

There is an ongoing scholarly discussion surrounding the potential causal relationship between trade flow, tourism, and gross domestic product (GDP). Extensive export margins have been recognized as significant drivers of economic progress in major industries in Thailand (Jongwanich, 2020). Simultaneously, the evolving importance of Thai tourism and its substantial role in the country’s economy underscores its contribution to economic expansion (Chancharat, 2011). It is worth considering that several factors, including education and labor market dynamics, could influence Thailand’s GDP and overall economic growth. For instance, research by Soyluet al. (2018) revealed that the unemployment rate and economic growth influence each other in Eastern European countries. Furthermore, a beneficial connection between government education spending and economic development has been identified in the Turkish economy (Mercan & Sezer, 2014). However, despite the available research findings, a conclusive confirmation of the precise interplay among education expenses, unemployment rate, tourism, visa exemption, trade, and GDP in Thailand remains elusive, leaving their mutual influence uncertain.

Education and Gross Domestic Product

Various studies underscore the robust relationship between education and GDP. Dhakal (2018) emphasizes that a country’s literacy rate serves as a vital indicator of its economic status, as heightened literacy enhances human capital, augments employment opportunities, and elevates socioeconomic status, leading to more equitable resource distribution and prosperity, as evidenced in India. Tamang’s (2011) examination of physical capital and government spending on education’s impact on GDP per worker reveals that a 1% increase in physical capital per worker yields a 0.28% rise in GDP per worker, while a similar increase in government spending on education results in a 0.11% GDP per worker increase. Similarly, Hussinet al. (2012) establish a short-term causal link between economic growth and education in Malaysia, highlighting the pivotal role of human capital in influencing economic expansion. Mercan and Sezer’s (2014) investigation further reinforces this notion, demonstrating a beneficial relationship between education spending and economic growth in the Turkish economy. Collectively, these studies provide substantial evidence supporting the proposition that investment in education significantly drives economic growth and prosperity by enhancing human capital, productivity, and resource utilization, ultimately positively impacting a country’s overall GDP. Drawing from this literature, it is hypothesized that there exists a positive correlation between government expenditure on education and GDP in Thailand (H1).

Unemployment and Gross Domestic Product

Numerous studies have contributed valuable insights into the intricate relationship between economic growth and the unemployment rate. Soyluet al. (2018) found an inverse correlation between economic expansion and underemployment, indicating that a 1% increase in GDP could lead to a decrease in the underemployment rate by 0.08%, as supported by Okun’s coefficient for Eastern European countries. Similarly, Khaliqet al. (2014) revealed that economic development significantly impacts the underemployment rate in Arab countries, suggesting that a 1% rise in economic growth could potentially reduce the unemployment rate by 0.16%. Tiwariet al. (2017) conducted a comprehensive investigation into the connection between India’s GDP and its underemployment rate, demonstrating a strong negative relationship between economic growth and unemployment. Their findings, which aligned with Okun’s law principles, emphasized the substantial impact of GDP on the unemployment rate, explaining about 48% of the observed variations. Overall, these studies underscore the critical link between economic development and the underemployment rate, highlighting the importance of understanding the dynamics between these macroeconomic variables for informed policy decisions and further research. Drawing from this literature, it is hypothesized that there exists a negative correlation between the unemployment rate and GDP in Thailand (H2).

Tourism and Gross Domestic Product

The literature review reveals a consistent pattern highlighting the positive correlation between tourism and economic growth across various regions and country sizes. Durbarry (2004) demonstrates this relationship in Mauritius, where tourism has significantly contributed to economic development, leading to a transformation from reliance on traditional exports to thriving tourism. Fayissaet al. (2008) emphasize the importance of tourism receipts in driving economic growth in sub-Saharan African countries, suggesting strategic investments in the tourism sector for short-term economic benefits. Sequeira and Maçãs Nunes (2011) extends this understanding globally, showing that tourism positively impacts economic conditions across diverse countries, including economically challenged nations, refuting previous assumptions about the disproportionate impact on small countries. In conclusion, the reviewed literature underscores the potential of the tourism industry as a catalyst for prosperity and growth. Policymakers and stakeholders are encouraged to strategically invest in and promote tourism to unlock its economic potential. Drawing from this literature, it is hypothesized that the profit from tourism positively correlates with GDP in Thailand (H3).

Visa Exemption and Gross Domestic Product

The scholarly exploration of visa exemption policies reveals their significant impact on the tourism industry and the broader economic landscape. Recognizing the importance of flexible inbound regulations, researchers have highlighted how such adaptability can enhance monetary inflows and stimulate economic growth through international tourism. Examples from Indonesia’s ambitious forecast and the positive outcomes observed in Hong Kong and Japan underscore the potential of visa waiver policies to drive substantial growth in tourist arrivals and overall economic development. As nations strive to attract investments in their Travel and Tourism (T&T) sector, visa policies emerge as pivotal factors shaping the global travel landscape. With the imminent ASEAN Economic Community (AEC) integration facilitating the free flow of goods and people, there is an opportunity for countries like Thailand to advocate for free visas for enhanced economic gains. Drawing from this literature, it is hypothesized that visa exemption positively correlates with GDP in Thailand (H4).

Trade Flow and Gross Domestic Product

The literature reviewed presents compelling evidence supporting the beneficial relationship between trade flow and GDP across different geographic areas and methodologies. Studies examining Latin American economies, such as that by Hendrik and Atrayee (2006), consistently show a favorable correlation between export growth and overall economic expansion. Similarly, research focusing on the Czech and Slovak Republics, like that conducted by Fitzová and Žídek (2015), highlights the significant role of exports in driving GDP growth, indicating a long-term equilibrium between trade and economic development in these countries. Furthermore, recent studies, including those by Nektarioset al. (2021), underscore the positive impact of containership trade on GDP growth, with the transportation of twenty-foot equivalent units (TEUs) significantly influencing economic expansion. These findings emphasize the importance of promoting strong trade policies to enhance economic prosperity globally. Drawing from this literature, it is hypothesized that there exists a positive correlation between trade flow and Gross Domestic Product in Thailand (H5).

Method

The research methodology adopted for this study aims to comprehensively analyze the relationships and consequences among various factors, including education, unemployment rate, tourism, free visa, trade flow, and gross domestic product (GDP) within the context of Thailand. The study extensively reviews relevant literature to understand these variables’ specific roles and relationships. Data for analysis is derived from reports published by reputable sources such as the World Bank, Bank of Thailand, and Department of Consular Affairs, covering a 25-year span from 1995 to 2019. The data collection process involves extraction based on availability and identifying indications of the impact and relationships among the variables. By applying statistical methods, such as regression and hypothesis testing, the study focuses on examining the influence of the tourism industry on Thailand’s economy and exploring the relationships between education, unemployment, tourism, free visa, trade flow, and GDP over the specified period.

Results

Regression Analysis

Table I summarizes the relationship between gross domestic product (GDP) and the unemployment rate. The regression equation indicates that for every 100 basis point increase in the Unemployment Rate, GDP is projected to decrease by 7430.5 basis points.

Table I. Coefficients Table of the Regression Model on Unemployment Rate and GDP

	Unstandardized coefficients		Standardized coefficients	t	p-value	Collinearity statistics
	B	Std. error	Beta			Tolerance	VIF
(Constant)	257.822	20.745		12.428	<0.001
Unemployment rate	−74.305	13.972	−0.743	−5.318	<0.001	1.000	1.000

Table II presents the relationship between gross domestic product (GDP) and tourism statistics. The regression equation suggests that for every 100 basis point increase in the money made from tourism, GDP is expected to increase by 39.4 basis points.

Table II. Coefficients Table of the Regression Model on Tourism Statistics and GDP

	Unstandardized coefficients		Standardized coefficients	t	p-value	Collinearity statistics
	B	Std. error	Beta			Tolerance	VIF
(Constant)	55.895	7.408		7.545	<0.001
Tourism statistics	394	0.022	0.966	17.894	<0.001	1.000	1.000

Table III summarizes the relationship between gross domestic product (GDP) and free visa country. The regression equation suggests that for every 100 basis point increase in the number of countries or territories entitled to visa exemption from Thailand, the GDP of Thailand is projected to increase by 256.9 basis points.

Table III. Coefficients Table of the Regression Model on Free Visa and GDP

	Unstandardized coefficients		Standardized coefficients	t	p-value	Collinearity statistics
	B	Std. error	Beta			Tolerance	VIF
(Constant)	−172.904	31.925		−5.416	<0.001
Free visa country	2.569	0.238	0.914	10.803	<0.001	1.000	1.000

Table IV provides a summary of the relationship between gross domestic product (GDP) and trade flow. According to the regression equation, for every 100 basis points increase in the value of the trade balance, the GDP of Thailand is expected to increase by 32.2 basis points.

Table IV. Coefficients Table of the Regression Model on Trade Flow and GDP

	Unstandardized coefficients		Standardized coefficients	t	p-value	Collinearity statistics
	B	Std. error	Beta			Tolerance	VIF
(Constant)	115.800	16.182		7.156	<0.001
Trade flow	0.322	0.072	0.683	4.482	<0.001	1.000	1.000

Table V presents a summary of the relationship between money made from tourism and free visa country. The regression equation suggests that for every 100 basis point increase in the number of free visa countries, money made from tourism in Thailand is projected to increase by 579.1 basis points.

Table V. Coefficients Table of the Regression Model on Free Visa Country and Money Made from Tourism

	Unstandardized coefficients		Standardized coefficients	t	p-value	Collinearity statistics
	B	Std. error	Beta			Tolerance	VIF
(Constant)	−485.249	104.251		−4.655	<0.001
Free visa country	5.791	0.777	0.841	7.458	<0.001	1.000	1.000

Table VI summarizes the relationship between unemployment rate and money made from tourism. The regression equation suggests that for every 100 basis point increase in the value of money made from tourism, the unemployment rate in Thailand is expected to decrease by 0.3 basis points.

Table VI. Coefficients Table of the Regression Model on Unemployment Rate and Money Made from Tourism

	Unstandardized coefficients		Standardized coefficients	t	p-value	Collinearity statistics
	B	Std. error	Beta			Tolerance	VIF
(Constant)	1.952	0.225		8.681	<0.001
Money made from tourism	−0.003	0.001	−0.618	−3.771	<0.001	1.000	1.000

Table VII provides a summary of the relationship between trade flow and money made from tourism. According to the regression equation, for every 100 basis point increase in the value of money made from tourism, the trade flow of Thailand is projected to increase by 68.7 basis points.

Table VII. Coefficients Table of the Regression Model on Trade Flow and Money Made from Tourism

	Unstandardized coefficients		Standardized coefficients	t	p-value	Collinearity statistics
	B	Std. error	Beta			Tolerance	VIF
(Constant)	−38.337	36.856		−1.040	0.309
Money made from tourism	0.687	0.110	0.794	6.270	<0.001	1.000	1.000

Table VIII presents a summary of the relationship between the unemployment rate and free visa country. According to the regression equation, for every 100 basis point increase in the number of free visa countries, the unemployment rate of Thailand is projected to decrease by 2 basis points.

Table VIII. Coefficients Table of the Regression Model on Unemployment Rate and Free Visa Country

	Unstandardized coefficients		Standardized coefficients	t	p-value	Collinearity statistics
	B	Std. Error	Beta			Tolerance	VIF
(Constant)	3.834	0.563		6.812	<0.001
Free visa country	−0.020	0.004	−0.698	−4.680	<0.001	1.000	1.000

Table IX summarizes the relationship between trade flow and free visa country. According to the regression equation, for every 100 basis point increase in the number of free visa countries, the trade flow of Thailand is projected to increase by 390.4 basis points.

Table IX. Coefficients Table of the Regression Model on Trade Flow and Free Visa Country

	Unstandardized coefficients		Standardized coefficients	t	p-value	Collinearity statistics
	B	Std. error	Beta			Tolerance	VIF
(Constant)	−361.821	125.998		−2.872	0.009
Free visa country	3.904	0.939	0.655	4.160	<0.001	1.000	1.000

The Importance of Free Visa Exemption

The paired-samples t-test results indicate the impact of the visa exemption regulation (after the tsunami incident in 2004) on the country’s gross domestic product. The results are provided in Table X.

Table X. Paired-Samples t-Test Comparing Before and After Free Visa Exemption

	Mean	Std. dev.	Std. error mean	95% CI of the difference		t	df	p
				Lower	Upper
Pair 1: before-after	−132.464	42.228	12.190	−159.295	−105.633	−10.866	11	<0.001

The test yielded a significant p-value below 0.001, indicating a notable distinction between Thailand’s GDP before (1995–2005) and after the expansion of countries included in the free visa policy (2006–2019). This underscores the economic impact of policy changes on a national scale, offering insights into the tangible effects of such shifts on Thailand’s economic landscape. Beyond statistical inference, this result reflects broader socioeconomic dynamics, highlighting the strategic significance of implementing a free visa policy to foster international relations, promote tourism, and stimulate economic growth. Further exploration into the mechanisms through which changes in visa policies influence economic indicators is warranted in light of these findings.

Summary of the Hypotheses Testing

H1: The hypothesis suggesting a positive correlation between government expenditure on education and Thailand’s GDP was rejected. This underscores the challenges facing Thailand’s education system, including inequality, funding disparities, policy instability, and low educational quality. Addressing these issues requires strategic investment, structural reforms, and policy stability to ensure equal access and high-quality learning. However, education spending alone may not guarantee economic growth, as other factors like government policies, infrastructure, technology, and global economic conditions also influence GDP.

H2: The hypothesis proposing a negative correlation between Thailand’s GDP and unemployment rate was accepted. This aligns with the common observation that during economic growth periods, unemployment tends to decrease, indicating more job opportunities, whereas economic downturns often lead to rising unemployment rates.

H3: The hypothesis suggesting a positive correlation between tourism revenue and Thailand’s GDP was accepted. The tourism sector significantly contributes to Thailand’s GDP through direct spending and job creation, stimulating further economic growth through consumer spending and related economic activities.

H4: The hypothesis stating a positive correlation between visa exemption policies and Thailand’s GDP was accepted. The flexibility of inbound regulations and visa policies plays a crucial role in promoting tourism, enhancing monetary inflows, and fostering economic growth.

H5: The hypothesis indicating a positive correlation between trade flow and Thailand’s GDP was accepted. International trade is vital for economic growth, diversification, and job creation, with Thailand’s export-oriented economy integrating into the global supply chain. Government policies also contribute to this positive correlation.

A summary table of the confirmations and rejections of the hypotheses can be found in Table XI.

Table XI. Summary of the Hypothesis Confirmations/Rejections

Hypotheses	Supported/Rejected
H1: There is a positive correlation between government expenditure on education and Gross Domestic Product (GDP) in Thailand	Rejected
H2: There is a negative correlation between unemployment rate and Gross Domestic Product (GDP) in Thailand	Supported
H3: Tourism statistics positively correlates with Gross Domestic Product (GDP) in Thailand	Supported
H4: Visa Exemption positively correlates with Gross Domestic Product in Thailand	Supported
H5: There is a positive correlation between trade flow and Gross Domestic Product (GDP) in Thailand	Supported

Conclusion

This research explores the relationship between economic growth and Thailand’s tourism industry by analyzing factors such as education expenditure, unemployment rate, tourism statistics, free visa policies, trade flow, and gross domestic product (GDP). It reveals that while education spending does not significantly impact GDP due to challenges within the education system, the unemployment rate negatively correlates with GDP, indicating that GDP rises with lower unemployment rates. Tourism statistics positively influence GDP, underlining the sector’s resilience and economic impact. The implementation of free visa policies is positively correlated with GDP, particularly in the tourism sector. Additionally, a positive trade balance contributes to economic expansion. Overall, the study emphasizes the importance of a holistic approach to foster both effective education systems and sustained economic growth in Thailand.

This study highlights two key implications: the need for an education enhancement policy to address educational inequality and a tourism industry support policy to boost Thailand’s tourism sector. Despite an observed lack of correlation between increased government spending on education and economic growth in Thailand, other economies, like Turkey, have demonstrated a positive relationship. Thus, Thailand requires an education enhancement policy focusing on teacher training, early childhood education, and addressing structural inequities. Similarly, the Tourism Industry Support Policy aims to strengthen Thailand’s tourism sector through strategic initiatives such as visa exemption policies, product diversification, and investment in human capital. By fostering public-private partnerships and promoting responsible tourism practices, Thailand can maximize the socioeconomic benefits derived from tourism activities.

Overall, these policies represent a holistic approach to fostering both an effective education system and sustained economic growth in Thailand, leveraging the country’s resources for development and prosperity.