This chapter focuses on the role of productivity in policymaking. Using an analytical framework that links productivity determinants with public policies, the chapter examines policy recommendations developed by Thai pro-productivity institutions and national plans focusing on policy areas relevant for productivity outcomes. The analysis finds that policy recommendations are often unspecific and focused only on certain policies and industries, leaving important productivity determinants aside. Thailand’s 13th National Economic and Social Development Plan (2023–2027), a central component of Thailand’s multi-layered planning system, only seems marginally informed by the advice produced by pro-productivity institutions and lacks a dedicated productivity agenda. The chapter provides recommendations on how a productivity council could help strengthen ties between expert advice and policymaking and inform a national productivity agenda.
Strengthening Productivity Analysis for Policymaking in Thailand
Abstract
Productivity is shaped by a variety of factors interacting with different policy areas. Identifying the key determinants of national productivity dynamics and the relevant policies to address challenges requires a holistic approach, cutting across responsibilities of different ministries and public institutions. As a result, developing a policy agenda that boosts productivity growth is challenging in Thailand, as it is elsewhere. This chapter focuses on how Thailand can better use analytical insights generated by its pro-productivity institutions to develop a comprehensive and structured productivity agenda for policymaking.
The chapter takes stock of both the policy advice provided by Thai pro-productivity institutions and elements of national planning focusing on productivity-relevant public policies. To assess the coherence between policy advice and planning, the analysis relies on an analytical framework developed by the OECD. This framework maps productivity determinants to a broad portfolio of public policies providing either firm-level incentives or capabilities to enhance productivity growth. For application to Thailand, policies covered in the standard OECD framework are complemented by additional policies identified by the 2023 OECD Economic Survey of Thailand and the research of Thai pro-productivity institutions. The framework is applied to more than 150 policy recommendations from Thai pro-productivity institutions and over 250 sub-strategies from the 13th National Economic and Social Development Plan, Thailand’s central planning instrument for 2023–2027.
The chapter is structured as follows. It first presents the OECD analytical framework for pro-productivity public policies and discusses possibilities for adding additional public policies that consider Thailand's economic context. It then focuses on the policy advice provided by Thai pro-productivity institutions and offers recommendations on how this advice could become more relevant for policymaking. It then explores the role of productivity in Thailand’s three-layered national planning system, particularly in the 13th National Economic and Social Development Plan. Finally, the last section provides recommendations on how to strengthen the productivity agenda in future planning.
An analytical framework can serve to assess how Thai pro-productivity institutions are targeting productivity growth in their policy advice and planning. Based on extensive research on the structural drivers of productivity growth in relation to various policy areas, the OECD has taken steps to conceptualise the contributions of different policies. André and Gal (2024[1]) reconcile analytical categories that have emerged in different publications and develop a high-level holistic framework to map how public policies affect productivity using a three-dimensional approach.
The first dimension specifies how policies affect the actions of private agents, whether they be business managers or employees. In this dimension, policies can either set incentives or strengthen capabilities. Incentives, such as policies stimulating competition or tax credits for R&D, motivate businesses or employees to undertake actions that lead to productivity improvements. Policies that strengthen capabilities, in turn, enable the business sector to become more productive including through improved access to skills, financing and knowledge.1
To further specify how a policy enhances a firm's capabilities to realise productivity gains, the second dimension of the framework looks at transition channels along the supply-side components of output, comprising labour, capital and multifactor productivity (MFP).2 Accordingly, a capability-oriented policy can drive productivity through improvements in labour quality, capital quality or a more efficient combination of labour and capital by means of knowledge creation and diffusion.
The third dimension identifies which group of firms is most affected by a policy, differentiating firms by their productivity levels and categorising them into leaders, those at the top of the productivity distribution forming the frontier, and laggards, those below the frontier. The framework allows for the possibility that policies may have an effect on all firms, independently of their productivity levels, so that the distinction is negligible in some cases. Rather than directly targeting a specific group of firms, policies can also promote the reallocation of resources across firms with different productivity levels.3
Table 3.2 presents policies according to their positioning relative to the three dimensions. The focus of the framework is on the primary effects of policies on targeted agents (in most cases firms). Second-round effects such as spillovers from increased business R&D spending to other firms in the economy are not considered (see for instance Lucking, Bloom and Van Reenen (2019[2])).
Source: The analytical framework for pro-productivity policies used in this report is based on the stylised framework "Raising aggregate productivity through incentives and capabilities" introduced by André and Gal (2024[1]), building on several foundational publications (OECD, 2015[3]; Andrews, Criscuolo and Gal, 2015[4]; Andrews, Criscuolo and Gal, 2016[5]; Égert and Gal, 2017[6]; Nicoletti, von Rueden and Andrews, 2020[7]).
The 2023 OECD Economic Survey of Thailand reviews the country’s economic situation, highlighting the importance of reviving productivity growth to support economic development and achieve high-income status. Many policy recommendations in the Survey, not only in the section aimed at boosting productivity growth, focus on strengthening incentives and capabilities for Thai economic agents, aligning with the dimensions and policies represented in the analytical framework (Table 3.1 above). Mapping relevant recommendations from the Survey with the analytical framework demonstrates how economic challenges impacting productivity growth can be translated into public policies. At the same time, the exercise highlights the OECD’s priorities for policy actions to revive Thailand’s productivity growth.
On the incentive side, the Economic Survey puts a strong emphasis on strengthening competition including through product market regulation (PMR) reforms and further improvements in foreign trade openness, especially in the service sector. Moreover, it focuses on providing incentives for technological innovation and adoption, upholding intellectual property rights, broadening fiscal support for R&D and using stringent market-based environmental policies.
For productivity-enhancing capabilities, the OECD advice targets all three channels of labour, capital and multifactor productivity. The quality of labour inputs is supposed to be strengthened by stepping up efforts in human capital and skill development through improvements in the education system, lifelong learning and active labour market programmes. Efficient allocation of labour resources is to be enhanced through greater mobility of both young and older workers, for instance by setting up career guidance programmes for the young and implementing measures against age-based job discrimination. The Survey targets capital quality and reallocation through recommendations to accelerate high-quality infrastructure investments in line with the budgetary investment target. Lastly, multifactor productivity is envisaged to improve through measures driving knowledge and technology transfers from frontier to average firms, including by further reducing restrictions on foreign ownership, especially in the service sector (Box 3.1).
Incentives
Strengthening competition
Many Thai industries are characterised by high market concentration and the dominance of conglomerates and ownership networks (Apaitan et al., 2020[8]). Policy recommendations in the 2023 OECD Economic Survey for Thailand emphasise the need to reduce barriers to competition, creating incentives for firms to become more productive.
The OECD recommends eliminating or adapting outdated product market regulations (PMR), with particular emphasis on lowering market entry barriers. One recommended regulatory change is allowing peer-to-peer trade in the retail electricity market to boost competition and investment for more renewable energy generation. Another dimension of PMR emphasised by the Survey is to foster the competitive environment between State-owned enterprises (SOEs) and private companies, including by avoiding competition-distorting subsidies. PMR plays an important role for productivity and the efficiency of resource allocation (Andrews and Cingano, 2014[9]). Firm-level evidence indicates that anti-competitive regulations in up-stream sectors negatively affect firm-level MFP throughout the supply chain (Bourlès et al., 2013[10]), whereas deregulation has the potential to promote productivity diffusion from frontier to laggard firms (Andrews, Criscuolo and Gal, 2016[5]).
A different angle of competition-related recommendations is trade facilitation. While acknowledging that progress has been made on foreign trade openness in Thailand, the Survey recommends further reducing fees and charges and expanding preferential trade agreements to revive trade growth and deeper integration in global value chains. For services trade, the OECD advises lifting residency requirements for management bodies and authorisation requirements for service provision. These reforms could incentivise foreign players to enter the market and high-skilled labour to migrate to Thailand from abroad. Evidence from other Asian countries suggests that greater competition in the service sector may also lead to productivity gains in downstream manufacturing industries that rely on services as inputs (Arnold, 2016[11]). Productivity gains from trade could be particularly large for firms that are closer to the industry-level technology frontier (Bas and Causa, 2013[12]).
Stimulating R&D through fiscal and non-financial incentives
The Survey recommends incentivising businesses to increase research and development (R&D) spending by allowing carry-forward of unused allowances for research and development tax incentives. Moreover, the scope of R&D tax incentives should be broadened to collaborations with research institutions. Fiscal support for R&D increases the attractiveness for firms to conduct R&D, thereby stimulating technological innovation at the firm level. This may enhance productivity both at the frontier and, through technology adoption and spillover effects, below (Dechezleprêtre et al., 2023[13]; Doraszelski and Jaumandreu, 2013[14]; Hall, 2020[15]).
In terms of intellectual property rights protection, the Survey finds that Thailand is generally comparable to its regional peers but lags in some areas, such as effectively preventing copyright piracy. Better protecting intellectual property rights can provide a non-financial incentive to stimulate firm R&D.
Incentives to innovate through stringent environmental policy
There are also productivity-relevant recommendations on the stringency of Thailand’s environmental policy such as introducing mandatory carbon pricing through a cap-and-trade system for key sectors. Stringent market-based environmental policy could incentivise innovation in carbon-free technologies (Porter hypothesis (Porter, 1991[16]; Porter and van der Linde, 1995[17])), enabling the transition from a carbon-intensive to a green capital stock (Bijnens et al., 2024[18]). A surge in green innovations could yield medium-term productivity gains and foster reallocation of resources towards more productive firms (Albrizio, Kozluk and Zipperer, 2017[19]). Stringent, market-based environmental policy has also been found to incentivise firms to better prepare for energy price shocks, resulting in a better medium-term productivity performance. However, the realisation of such gains depends on firm investments in energy efficiency, which are influenced by prevailing macroeconomic and investment conditions (André et al., 2023[20]). Lastly, the Survey recommends the use of public procurement and tenders to encourage large-scale power producers to adopt renewable energy technologies. By setting standards for environmental sustainability, public procurement can set innovation incentives with positive externalities for productivity growth (Baron, 2016[21]; OECD, 2011[22]).
Capabilities
Through labour quality and (re-)allocation
Human capital development plays an important role for firm-level productivity growth. Worker and managerial skills represent two important channels for this relationship (Criscuolo et al., 2021[23]). The Economic Survey offers recommendations on strengthening foundational skills and basic qualifications, as well as developing adult skills that meet emerging market needs. To improve education system outcomes, the Survey suggests increasing education budgets combined with more efficient spending. The Survey also recommends expanding active labour market policies, which may include offerings such as skills training, employment services, subsidised employment, and entrepreneurship support, particularly for young people who are neither employed nor in education.
Productivity gains through the labour channel can also be achieved by enabling efficient (re-)allocation of labour supply (Coraggio et al., 2024[24]), including by strengthening the mobility of both young and older workers (OECD, 2020[25]; Causa, Luu and Abendschein, 2021[26]). The Survey recommends improving career guidance programmes for young people to facilitate productive worker-to-job matches through increased funding and enhanced inter-ministerial coordination. Additionally, it suggests implementing measures to combat age-based job discrimination, ensuring that the skills and knowledge of older workers can be used at their full potential.
Through capital quality, deepening and (re-)allocation
Public investment is crucial for strengthening firms' capabilities to acquire and employ capital productively. A key policy lever is the provision and sound governance of high-quality infrastructure in network sectors such as transport, energy and ICT (Ramey, 2020[27]; Demmou and Franco, 2020[28]). Firm-level analysis for Thai manufacturing firms reveals that broadband internet connectivity has significantly positive effects on multifactor productivity (MFP), especially for SMEs (Nakavachara, 2020[29]). As the Survey finds that capital expenditure is well below the budgetary target of 20%, it recommends increasing public investment spending based on careful cost-benefit analyses.
Through multifactor productivity (MFP)
Multifactor productivity can be improved by enhancing firms' capabilities to efficiently combine labour and capital inputs. Know-how and technology spillovers from firms closer to the global productivity frontier to domestic firms can be facilitated through foreign direct investment (FDI). Positive effects of FDI and integration into global value chains on firm-level productivity are evident for Thai manufacturing firms (World Bank and Bank of Thailand, 2020[30]) as well as downstream industries (Wiboonchutikula, Phucharoen and Pruektanakul, 2016[31]). Promoting FDI comprises policies to improve the ease of doing business and legal certainty of investments for foreign firms and providing relevant network and knowledge infrastructure (OECD, 2022[32]). It also includes reducing regulatory entry barriers. The Survey recommends going beyond Thailand’s new FDI strategy adopted in 2022 and further reducing restrictions for foreign ownership particularly in the services sectors.
Note: The review presented in this box is based on the substance and recommendations of the chapters 'Key Policy Insights' and 'Pursuing a Strong and Inclusive Green Recovery' of the 2023 OECD Economic Survey of Thailand that correspond to the policy areas included in the analytical framework presented in André and Gal (2024[1]).
Source: OECD Economic Surveys: Thailand (OECD, 2023[33]).
Many drivers relevant to Thailand's productivity challenge are addressed by the OECD framework for pro-productivity policies. However, some factors influencing productivity in the Thai economy are not necessarily detailed within this framework, despite fitting within its conceptual cornerstones. Applying the analytical framework to the 2023 OECD Economic Survey of Thailand and research from Thai pro-productivity institutions, Box 3.2 examines complementary policies that could help revive productivity growth in Thailand.
Relevant incentives extend to further improving the business environment by broadening the benefits of the Special Economic Zones (SEZ) and to better enforce pro-competition integrity policies backed by more effective anti-corruption frameworks and stronger collaboration with the private sector on anti-corruption initiatives (OECD, 2023[33]). Following the considerations from the Survey and various publications by PIER and the Ministry of Labour, capabilities could be enhanced through the labour and capital channel by reducing informality in the labour market and facilitating investments for climate change adaptation.
While the policy areas highlighted in Box 3.2 are important, they are not exhaustive. This underscores the necessity for further country-tailored work to identify additional policies to address relevant productivity drivers. Systematically undertaking such an exercise (see recommendation 12 below) would be valuable for developing a Thailand-specific analytical framework for productivity-enhancing public policies.
Incentives
Extending the productivity-friendly environment of the Special Economic Zones (SEZ)
Thailand has established Special Economic Zones (SEZs) to support the economic transformation towards higher-value-added activity in both manufacturing and services. SEZs can be considered as an incentive-based policy approach as they bundle several instruments including tax advantages and reduced market entry barriers through relaxed FDI restrictions, under certain conditions. However, the effects of SEZs need to be further explored. For example, a recent PIER study finds no evidence that firm location in the Eastern Economic Corridor (EEC) strengthens the relationship between technology (automation) adoption and firm-level productivity (Sangsubhan, Pornpattanapaisankul and Kambuya, 2023[34]). Since benefits from the Zones are geographically restricted, the Economic Survey recommends gradually extending regulatory and administrative reforms to the wider economy if they prove effective in promoting productivity and job creation (OECD, 2023[33])."
Strengthening integrity policies backed by more effective anti-corruption frameworks for fair and competitive markets
Stronger anti-corruption coordination could provide a productivity-enhancing incentive to firms by making the business environment fairer and more predictable. According to the 2023 Economic Survey of Thailand, policies could target stronger cooperation among anti-corruption agencies by establishing an integrity network and fostering collaboration with the private sector through focal points and information exchange on updated guidelines and whistleblower protection laws (OECD, 2023[33]).
Capabilities
Through labour quality and (re-)allocation
Addressing the informal economy. Boosting productivity growth in Thailand hinges on improving labour quality and reallocation. An important step in this area could be addressing the high levels of informality within the labour market. Informal labour, defined as work without employment security or social security coverage, accounts for over fifty percent of total employment, despite a gradual decline over the past two decades and a lower incidence among younger workers. More than half of all informally employed workers are in the agricultural sector, followed by one-third in the service and trade sectors and under ten percent in manufacturing (NSO, 2023[35]).
In addition to significant challenges related to social protection, such as the lack of safety nets in the event of job loss and inadequate pensions, high levels of informality may place a burden on aggregate productivity. Many Thai informal workers report adverse working conditions, including unhealthy environments and safety risks (NSO, 2023[35]). This might reduce worker-level productivity through injury, illness and time-consuming mitigation efforts (Korwatanasakul, 2021[36]). Moreover, the informal sector tends to be labour-intensive and often acts as a structural absorber of workers, channelling them into firms that engage in unproductive activities or struggle to operate within the formal economy (Djidonou and Foster-McGregor, 2022[37]; La Porta and Shleifer, 2014[38]). Moreover, frictions preventing workers’ job transition to formality can hinder the reallocation of labour resources towards more productive firms and increase skill mismatches (OECD, 2024[39]; Priyaranjan and Hasan, 2021[40]).
The Survey recommends several policy measures to address informality. They entail reducing non-wage labour costs for low-income earners, reviewing labour market regulations and enhancing enforcement, including through the increased use of digital tools (OECD, 2023[33]). A PIER discussion paper, analysing the Informal Employment Survey from 2006 to 2019, further suggests investing in education to guide young people towards formal employment and implementing training programmes aimed at improving the skills and wages of informal sector workers to reduce their vulnerability (Korwatanasakul, 2021[36]).
A study by the Ministry of Labour also recommends reinforcing labour safety standards, limiting working hours and ensuring stricter enforcement of applicable regulations (MOL, 2022[41]). Such improvements could positively affect labour productivity through the capabilities channel, particularly in industries with high risk levels, such as construction (Tam, Huong and Ngoc, 2018[42]).
Through capital quality, deepening and (re-)allocation
Creating better framework conditions for climate change adaptation investments. Adaptation to climate change is affecting the productivity of the Thai economy through various channels including the capital stock. As one of the world’s most vulnerable countries to climate change (OECD, 2023[33]), Thailand will need to scale up investment in adaptation to over one percent of GDP annually (IMF Asia and Pacific Department, 2022[43]) to minimise the detrimental impact of both slow-onset events (e.g. rising sea levels, gradual temperature increases) and extreme weather events (e.g. storms, floods and heatwaves).
Climate change-related hazards may directly disrupt the existing capital stock so that policies fostering the channelling of more public and private capital into adaptation investments will be necessary to preserve productive economic capacity. The Economic Survey recommends strengthening the resilience of financial institutions as key providers of adaptation funds by establishing a systematic approach towards climate risk assessments in stress tests of financial institutions (OECD, 2023[33]).
Moreover, infrastructure provision will play an essential role in adaptation. To maintain agricultural productivity, the climate resilience of the sector needs to be strengthened (Prommawin et al., 2022[44]), including by increasing the capacity of modern irrigation infrastructure (Boonwichai et al., 2018[45]; OECD, 2023[33]). Both the need to adapt and adaptation will lead to shifts in economic activity. Therefore, policies could also focus on facilitating the reallocation of capital across firms in different regions and sectors.
Drawing on the OECD framework for pro-productivity policies with additions for some Thailand-specific settings, the recommendations of Thai pro-productivity institutions and the sub-strategies outlined in the 13th National Economic and Social Development Plan are mapped to the productivity drivers they address. This serves both to show how the activities conducted by Thai pro-productivity institutions tie in with policymaking and identify which potential productivity determinants receive little attention in Thai recommendations and plans.4
Policy advice in the form of recommendations is a key tool for translating analytical insights on productivity trends and drivers into policy interventions. When effectively developed and formulated, recommendations bridge the gap between complex data and expert analysis on one side and policymaking on the other, guiding reform initiatives across the various policy areas that influence productivity.
Policy recommendations aimed at strengthening productivity can be relevant at various stages of the policy cycle. They can offer initial guidance on the choice and design of pro-productivity policies by suggesting high-level strategic directions or specific instruments. Another function is to provide input on enhancing the effectiveness and efficiency of existing policies, often anchored in evaluations (Cavassini et al., 2022[46]). In a complementary role, recommendations can also guide improvements in the government’s analytical and administrative capacity which are crucial for successful policy implementation. Given the variety of important functions, the effective use of policy recommendations deserves careful examination. Their effectiveness depends on factors from both the “supply side”, the analytical institutions providing recommendations, and the “demand side”, the government bodies that address or consult these recommendations to inform policy choices.
On the supply side, the content and formulation of recommendations are crucial to their effectiveness, with three features standing out: comprehensive consideration of policy-relevant drivers, the specificity of the recommendations, and clarity in assigning responsibility for action. First, productivity is influenced by various interconnected policy areas. While recommendations cannot incorporate all policy areas at once, formulating them based on strong analytical frameworks ensures that no important drivers are overlooked.5 Second, specific formulations in recommendations, defining instruments to pursue an objective, help policymakers take concrete actions, whereas unspecific recommendations require further analysis and elaboration, increasing the risk of neglect or rejection. Third, assigning responsibility for action to an addressed institution helps identify who is responsible for implementation and holds government entities accountable for policy choices, thereby also reinforcing the benefits of the first two features.
Most Thai pro-productivity institutions formulate policy recommendations, albeit in different formats
Analytical entities within all ministries concerned with productivity growth either provide recommendations in annual survey-based reports or ad-hoc studies (see Chapter 1 for more details on the different outputs). The OIE’s TFP report offers comprehensive recommendations tailored for various industries within the manufacturing sector (OIE, 2022[47]). NXPO formulates policy recommendations on linkages between R&D and productivity based on insights from the annual R&D survey, conducted together with the NRCT (NXPO, 2022[48]; NXPO, 2022[49]; NXPO and NRCT, 2022[50]). The economic offices of the Ministries of Agriculture and Labour develop policy guidance through ad-hoc studies that are thematically comprehensive (OAE, 2022[51]), sometimes formulating recommendations at the industry (sub-sector) level (MOL, 2021[52]; MOL, 2022[41]).
The Bank of Thailand issues policy advice in three formats. First, PIER discussion papers often conclude with policy implications based on quantitative economic research on selected research questions, such as the links between automation and productivity growth (Sangsubhan, Pornpattanapaisankul and Kambuya, 2023[34]). Although these implications are not explicitly stated as recommendations, they do offer concrete guidance for policy action. Second, some PIER discussion papers inform policy briefs, in a format called aBRIDGEd, in which the authors translate insights from their research into key policy messages. Third, the joint report between the Bank of Thailand and the World Bank provides ad-hoc recommendations, covering various productivity-related policy areas including competition policy, intellectual property rights, workforce development initiatives and FDI liberalisation (World Bank and Bank of Thailand, 2020[30]).
Despite its productivity-related analysis and policy mandate, the NESDC does not include recommendations in its annual flagship publication, the Capital Stock report (NESDC, 2022[53]). However, as the NESDC defines Thailand’s high-level economic policy agenda through the National Economic and Social Development Plans, it is a key recipient of recommendations, further discussed below.
Assessing the capacity of Thai institutions to effectively convey productivity insights to policymakers necessitates a close look at the supply side of advice. For this, the report examines the functions of policy recommendations and their characteristics in terms of their comprehensive coverage of relevant policy areas, their specificity and whether they assign responsibilities for action to selected institutions. To analyse as many relevant and recent recommendations as possible, all publications with at least one recommendation, published by the institutions mentioned in Chapter 1 between 2020 and today, are taken into account. For recurring publications, only the latest edition is included, while for PIER discussion papers, the analysis extends back to 2016 to account for their more time-consuming research process. Using this scope, eighteen publications from six institutions are identified, resulting in over 230 recommendations (Table 3.2).
Note: For all institutions except PIER, publications from 2020 to 2024 have been taken into consideration. For recurring annual reports, only the latest available editions are included. Thematically relevant PIER discussion papers have been considered from 2016 onwards.
Many recommendations of Thai pro-productivity institutions focus on business decisions and the efficiency of the public sector
The over 230 recommendations by Thai pro-productivity institutions serve a variety of functions. Nearly one in four recommendations does not aim to shape policies but rather addresses directly market participants, especially firms. This is the case for most industry-specific recommendations in the OIE’s TFP report (OIE, 2022[47]) and several recommendations by the Ministry of Labour (MOL, 2021[52]; MOL, 2022[41]). These recommendations focus on strategic business decisions, such as capital or R&D investment, production process optimisation or employment practices (Figure 3.1).
Source: OECD elaborations.
Business practices and firm performance play an important role for productivity outcomes. The Economic Survey outlines that significant potential gains in energy productivity can be achieved in the Thai manufacturing sector by upgrading machinery to more efficient production technology (OECD, 2023[33]) (Box 3.1). While firms, in principle, should aim to maximise their productivity, not all do so for reasons including, but not limited to, lack of information or lack of financial means to undertake necessary investments (e.g. due to underdeveloped and imperfect financial markets). Therefore, it can be beneficial for pro-productivity institutions to provide recommendations to the business sector, as some of these barriers can be overcome. However, to affect business practices and optimal management decisions, such as investing more, the economic environment plays and important role. To be more effective, productivity institutions could link recommendations directly addressed to businesses with policy recommendations aimed at creating the right framework conditions and incentives, such as fiscal advantages, reinforcement of intellectual property rights, deepening of capital markets or improvements in the energy infrastructure.
Over seventy-five percent of all recommendations are directly or indirectly addressed to public institutions. A small subset of these recommendations focuses on strengthening the capacity and efficiency of the public administration (Figure 3.2). Recommendations for stronger institutional capacity are directed towards various government and public entities, including intellectual property-related agencies, universities, the food and drug administration and municipalities. Strengthening these institutions could improve the productivity of the Thai economy through different channels. First, higher productivity in the public sector, the largest employer and economic actor, can affect aggregate productivity developments, even though measuring productivity trends in non-market sectors is challenging (Sorbe, Gal and Millot, 2018[61]; van Ark, 2022[62]). Second, administrative burdens on the private sector, such as lengthy bureaucratic licensing procedures, can hinder productivity growth by negatively affecting competition in product markets, business dynamism and labour mobility (Bambalaite, Nicoletti and von Rueden, 2020[63]).
Another equally large subset of recommendations focuses on improving system and data infrastructure in relevant public sector institutions and agencies (Figure 3.2). Most of these recommendations complement the public policy advice discussed below. For instance, the Bank of Thailand and the Ministry of Labour recommend developing skill monitoring systems that integrate data from various policy areas, including the labour market, education system and migration (World Bank and Bank of Thailand, 2020[30]). Further operational recommendations for enhancing skill monitoring systems call for improved reporting accuracy of existing policy interventions, such as skill development programmes. These recommendations also suggest establishing data collection partnerships with bodies outside the Thai government, such as employment services, employers and job portals. Other institutions, including NXPO and the Office of Agricultural Economics, also provide recommendations on system and data infrastructure in other areas such as social security information, innovation-driven enterprises and agriculture.
Source: OECD elaborations.
Policy recommendations focusing on public policies prioritise capabilities over incentives
The remaining 154 recommendations focus on productivity-related public policies (Figure 3.2 above). These recommendations can be further differentiated to explore, which productivity drivers are frequently conveyed to policymakers. Coding the recommendations according to the public policy they promote requires a standardised approach that allows for a high degree of differentiation, even between related policy areas, to enable meaningful interpretation. The OECD pro-productivity policy framework (Table 3.1 above), extended by some Thailand-specific challenges (Box 3.2 above), is suitable for this purpose due to its evidence-based foundation, high degree of detail, comprehensive scope and consideration of country-specific challenges.
Mindful of the scope and limitations of such an exercise, the 154 public policy recommendations are analysed using the framework. The application of the framework requires two steps. The first step is classifying the recommendations, responding to the following two to three questions:
1. Does the recommended policy provide an incentive for firms to become more productive or allocate additional resources, or does it strengthen their capabilities to operate more productively and allocate resources more efficiently?
2. Who is primarily affected by the recommended policy: highly productive firms near the productivity frontier, all other firms below the frontier, or both, or does the policy aim to facilitate the reallocation of resources between firms of different productivity levels?
If the policy focuses on capabilities, a third question arises:
3. Does the policy strengthen the quality of production inputs, such as labour or capital, and help firms use them to their full potential, or does it enhance the efficient combination of both inputs, directly addressing multifactor productivity (MFP)?
Based on the answers to these questions, in a second step, the recommendation is placed in the relevant quadrant of the framework to evaluate how well it aligns with the policies outlined in the extended framework (Table 3.3). If applicable, the recommendation is then assigned to one of the following policy areas:7
Note: Policies highlighted in blue are added to the ones listed in the standard OECD framework presented in Table 3.1.
Source: Elaborations based on André and Gal (2024[1]), OECD (2023[33]) and the publications of Thai pro-productivity institutions listed in Table 3.2.
Figure 3.3 presents the relative propensity of Thai pro-productivity institutions to recommend different incentive-focused policies, with larger fields representing more frequent references to a particular policy area. Incentive-focused recommendations are distinguished between those targeting firm-level productivity improvements (in blue) and those incentivising the allocation of resources to more productive firms (in yellow). Overall, there are relatively few incentive-focused recommendations, accounting for only around one-fourth of all recommendations on public policies.8
The recommendations proposing incentives mostly focus on fiscal instruments for innovation and diffusion. Some of these recommendations refer to government targets for research and development set in existing government plans, such as raising gross domestic expenditure on research and development (GERD) above 2% of GDP (NXPO, 2022[48]; NXPO and NRCT, 2022[50]). However, only a few policy views are based on assessments of existing support instruments and highlight the need for design changes. This is the case with a PIER study on firm-size-dependent tax incentives targeting SMEs (Muthitacharoen, Paweenawat and Samphantharak, 2024[59]).
In addition to fiscal incentives, a limited number of recommendations propose strengthening competition through various policy channels. These include upgrading and adapting antitrust measures, reforming product market regulation (PMR), further promoting international trade openness and easing barriers to service trade. Reforming PMR encompasses a variety of different policies in turn, such as simplifying bureaucratic procedures for permits and licensing and providing legal clarifications on the role of state-owned enterprises and price controls. Most competition-related policy advice comes from the Bank of Thailand and PIER, whose research investigates competition across different sectors of the Thai economy, including by conducting firm-level analyses of market structure and mark-ups (World Bank and Bank of Thailand, 2020[30]; Paweenawat, Chucherd and Amarase, 2017[56]; Attavanich et al., 2019[57]; Banternghansa, Paweenawat and Samphantharak, 2019[58]; Apaitan et al., 2020[8]).
There is also a very limited number of recommendations to strengthen intellectual property (IP) rights, most relevant for the country's most innovative firms to push the national productivity frontier. These recommendations include amending Thailand’s existing IP regulatory framework in line with the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), formerly known and referred to as the Trans-Pacific Partnership (TPP) (World Bank and Bank of Thailand, 2020[30]).
Policy recommendations on incentives for the reallocation of resources from less to more productive firms are even more limited. Only one publication by PIER points to the need to strengthen resource reallocation and allocative efficiency through policy actions that reduce market entry and exit barriers, including reducing size-dependent policies that could increase the survival of 'zombie' firms in the market (Paweenawat, Chucherd and Amarase, 2017[56]). There is no mention of other policy options incentivising reallocation, such as measures to mitigate political uncertainty affecting investment decisions, reducing hiring and dismissal costs and implementing well-designed market-based environmental policies.
Overall, recommendations on non-fiscal incentives for firm-level productivity improvements and reallocation are formulated by relatively few institutions (mostly PIER and the Bank of Thailand). They are also much less frequent than capability-oriented recommendations. This stands in contrast to the recommendations of the 2023 OECD Economic Survey of Thailand, which emphasises many aforementioned policy areas as crucial for reviving the country’s productivity growth (OECD, 2023[33]) (see Box 3.1 above). Moreover, the relatively strong focus on fiscal support among the incentive-focused recommendations indicates potential room to diversify policy advice to better leverage non-budgetary policy instruments. Non-financial incentives for productivity gains could help address the expected rise in public spending pressures related to the megatrends of climate change and population ageing in the coming decades (OECD, 2023[33]).
Lastly, some country-specific policy challenges relevant to boosting productivity are not mirrored in the recommendations of Thai pro-productivity institutions, contrasting with the emphasis in the 2023 OECD Economic Survey of Thailand (see Box 3.2 above). This is the case for efforts to improve the business environment through stronger integrity policies and anti-corruption efforts. There is also no mention of broadening policies that prove effective in the Special Economic Zones (SEZs) to firms across the economy (OECD, 2023[33]).
Relative frequency of policies in incentive-focused policy recommendations (grouped by target)
Note: The figure shows the frequency of policies mentioned in the reviewed recommendations with a focus on public policy. Each recommendation is weighted based on the total number of recommendations in the source publication, assigning a proportionately higher weight to publications with fewer recommendations.
Capability-oriented recommendations account for 74% of all recommendations focusing on public policies. Categorising the recommended policies based on the supply-side components they are targeting reveals a diverse coverage of labour and capital quality and reallocation as well as approaches to enhance multifactor productivity (MFP) (Figure 3.4).
Labour is the supply-side component most often targeted, with most recommendations seeking quality improvements. The largest single policy area addressed in recommendations is training and lifelong learning to foster adult skills and managerial quality. All six institutions in scope provide policy advice in this domain, with the recommendations tailored to the sectors and areas they are responsible for (NXPO, 2022[49]; OIE and FPRI, 2022[60]; World Bank and Bank of Thailand, 2020[30]; Srithanpong, 2016[55]; Banternghansa, Paweenawat and Samphantharak, 2019[58]; OAE, 2022[51]). The Ministry of Labour, responsible for economy-wide skill development programmes, has a broad set of recommendations cutting across sectors (MOL, 2021[52]; MOL, 2022[41]). Many recommendations prioritise skill development aligned with emerging labour market needs in industries with strong prospects, as prioritised in national planning, focusing in particular on different dimensions of digital skills. Some recommendations also deal with incentives for the private sector to step up on-the-job training offers. Importantly, several recommendations on adult skill formation address informality in the labour market, exploring possibilities to deploy programmes to informal workers as well as young people not engaged in education, employment or training (NEETs).
A limited number of recommendations focus on other channels to increase labour quality including the education system to foster foundational skills and basic qualifications or improvements in employee welfare, safety and working conditions. Recommended policies in the area of education, mostly provided by NXPO, include strengthening accessibility by expanding need- and merit-based student loan programmes, increasing online and virtual offerings for higher education and closing skill gaps between education and employment through approaches such as the dual education model and work-integrated learning (NXPO, 2022[49]). Recommendations on working conditions are formulated by the Ministry of Labour and often emphasise approaches to strengthen educational safety and creating environments conducive to high-quality work (MOL, 2021[52]; MOL, 2022[41]). Overall, the strong emphasis on labour quality improvements through human capital development and upskilling in line with changing labour market needs corresponds to the policy priorities formulated in the OECD Economic Survey for Thailand (OECD, 2023[33]) (see Box 3.1 above).
However, compared to the diverse coverage of labour quality improvements, relatively few recommendations focus on facilitating labour reallocation through policies enabling labour mobility and productive job-worker matches. Approaches covered by institutions in different ministries include encouraging the enhancement of job matching mechanisms and platforms to address needs in industries with particularly strong labour shortages as well as attracting highly skilled talent from abroad for instance through the Global Talent Visa (NXPO, 2022[48]; NXPO, 2022[49]; World Bank and Bank of Thailand, 2020[30]; MOL, 2022[41]; OIE and FPRI, 2022[60]).
Although less frequently mentioned than the labour channel, capability-focused recommendations for the capital channel propose a diverse range of policies to strengthen both capital quality and resource reallocation. The two dominant policy areas in this field are reducing barriers to private investments and providing quality infrastructure. To address private investment barriers, the most common recommendation is to improve access to financing for SMEs to facilitate the renewal of their capital stock, with a focus on the availability and cost of credit (though the instruments often remain vague, a general issue discussed further below) (OIE and FPRI, 2022[60]; Banternghansa, Paweenawat and Samphantharak, 2019[58]). Additionally, some recommendations propose shifting public support for investment from demand-side measures, such as tax incentives, to supply-side policies reducing investment obstacles (Limjaroenrat, 2016[54]). Enabling climate change adaptation investment is also covered in different publications, although with a strong focus on the agricultural sector (MOL, 2021[52]; Attavanich et al., 2019[57]; OAE, 2022[51]).
Policy advice on infrastructure provision addresses various needs across the economy, ranging from irrigation infrastructure in agriculture to scaling broadband infrastructure to enhance the absorptive capacity for digital tools among smaller manufacturing and service sector firms (NXPO and NRCT, 2022[50]; Attavanich et al., 2019[57]; Nakavachara, 2020[29]; OAE, 2022[51]).
Capabilities also directly address multifactor productivity (MFP), with the most mentioned policy area being the improvement of conditions for knowledge diffusion. This involves advice to further liberalise FDI, for instance in financial services (World Bank and Bank of Thailand, 2020[30]) as well as attracting more investment in strategically prioritised industries such as electric vehicle battery packs, parts and components (NXPO and NRCT, 2022[50]). Other recommendations in the field highlight supporting the absorptive capacity of domestic enterprises for digital technologies, especially SMEs, for instance through educating entrepreneurs and managers about the performance benefits of adopting relevant digital technologies into business and production processes (Nakavachara, 2020[29]).
Relatively few recommendations focus on knowledge creation rather than on diffusion. NXPO provides advice in this area, related to its programmes and initiatives like the higher education sandbox, the university holding company scheme and the internationalisation of research universities (NXPO, 2022[48]; NXPO, 2022[49]). There are also a few recommendations by other pro-productivity institutions for strengthening cooperation between educational institutions, research agencies and firms to enhance the outcomes and benefits of research and development (OIE and FPRI, 2022[60]; MOL, 2021[52]).
Relative frequency of policies in capability-focused policy recommendations (grouped by transition channel)
Note: The figure shows the frequency of policies mentioned in the reviewed recommendations with a focus on public policy. Each recommendation is weighted based on the total number of recommendations in the source publication, assigning a proportionately higher weight to publications with fewer recommendations.
Recommendations would benefit from being more specific and assigning responsibility for action to explicitly mentioned recipients
The analysis of the 153 recommendations focusing on public policies indicates that they generally tend to be unspecific and unaddressed.
Only one-third of the recommendations specify clear policy actions to achieve defined objectives, with several factors contributing to this lack of specificity.9 As mentioned earlier in this section, the underlying analyses sometimes do not provide sufficient insights into the drivers of productivity developments to support well-grounded policy advice. Even when analyses offer conclusive evidence, institutions formulating recommendations may lack detailed knowledge of relevant policy options to address specific situations. Developing more detailed and context-specific policy guidance is a time-consuming process that may be constrained by resources, especially when institutions are tasked with formulating numerous recommendations for multiple industries within an economic sector, as seen in some of the examined Thai publications. Lastly, more specific advice may not be formulated when publications do not fulfil a clearly defined goal and are not addressed or presented to a specific recipient.
Moreover, only one in four policy recommendations (27%) explicitly or implicitly assigns responsibility to a public institution for taking action.10 Even if the advice reaches policymakers, it leaves them too much discretion to determine whether they are responsible for taking action and, given the prevalent lack of specificity, how to interpret the recommended actions. Similar to the reasons many recommendations lack specificity, assigning responsibility to institutions requires a thorough understanding of the roles, responsibilities, and competencies of different parts of the government. Another reason many publications by Thai pro-productivity institutions do not assign responsibility may be their limited integration into the policymaking process. Specifying responsibility within recommendations becomes more challenging when consultation with government institutions is limited during the drafting process.
The policy recommendations developed by Thai pro-productivity institutions address many policy areas relevant to reviving productivity growth in Thailand. Recommendations are provided by six institutions, four of them located within ministries focusing on different topics and sectors, the Bank of Thailand and PIER, which follow a research approach seeking to fill general knowledge gaps. The analysis of over 150 policy recommendations from eighteen publications reveals thematic and sectoral complementarity in the policy advice of these institutions dispelling the risk of redundancy or conflicting stances.
Recommendations extensively focus on enhancing firms' capabilities to become more productive through the labour, capital and MFP channels, accounting for almost three out of four policy recommendations. Fiscal incentives promoting innovation and diffusion are also frequently mentioned. However, some key determinants of Thailand’s productivity challenge, as highlighted by the 2023 OECD Economic Survey (Box 3.1), are not comprehensively addressed by the policy recommendations of Thai pro-productivity institutions. This includes high market concentration and entry barriers in many Thai industries, potentially impeding competition, business dynamism and factor reallocation from less to more productive firms. The analytical framework presented in this chapter comprises a variety of non-financial incentives that could help address these productivity determinants. To enhance competition, various PMR reforms, measures to reduce barriers to investment, trade and market entry in services are available. To improve resource reallocation, there are policy options for reducing hiring and dismissal costs, addressing investment uncertainty, and strengthening well-designed environmental regulations and incentives. Yet, these policies are rarely considered in the recommendations of the Thai pro-productivity institutions.
The lack of coverage of crucial productivity determinants in the recommendations may have structural causes. One reason for the absence of pro-competition reform recommendations could be the lack of analytical insights on market structure, business dynamism and resource reallocation, as well as the exclusion of the service sector in most studies. Most recommendations and policy discussions in these areas stem from only a few publications by the Bank of Thailand and PIER, which have access to rich firm-level datasets, such as the Corporate Profile and Financial Statement (CPFS) database, covering all registered firms in Thailand, including services and enabling advanced investigation of firm-level dynamics.
Addressing issues of data availability and analytical coverage will be crucial for better policy advice (as recommended in Chapters 1 and 2 of this report). However, steps should also be taken to create a clearer overview of available policy options to address identified determinants of the productivity challenge. Adopting a holistic analytical framework that links insights on productivity dynamics with public policies across various areas could help.
Lastly, the formulation of policy recommendations should be strengthened. Even when recommendations focus on relevant policies, only around one-third of them specify a detailed policy action or instrument to achieve an objective. Very few recommendations refer to existing policy settings or instruments and suggest improvements or adjustments. Only one-fourth of the examined recommendations assign responsibility for policy action to explicitly or implicitly mentioned government institutions. The other recommendations are generic, with no clear indication of who should implement what.
Many pro-productivity institutions in OECD countries face similar challenges and have developed practices to maximise the relevance of recommendations on the policymaking process. For instance, Ireland’s NCPC develops productivity-related policy recommendations that reconcile the three dimensions of first, considering a comprehensive selection of relevant policy options to tackle the productivity challenge (Box 3.3), second, linking policy objectives to actionable steps and instruments and third, assigning responsibilities to explicitly mentioned recipients of the recommendations (Box 3.4).
Recommendation 12: Adopt an analytical framework that helps address missing sectors and productivity determinants and strengthen the link between analysis and pro-productivity public policies.
The framework could be implemented and applied progressively and updated regularly.
Phase 1: The recommended productivity council, with the support of its secretariat, could adopt a customised analytical framework for Thailand. To link analytical insights on productivity to policymaking, Thailand could build on the OECD framework connecting productivity determinants (such as firm-level improvements, allocative efficiency and business dynamism) with incentive- and capability-based policies, targeting different private agents (frontier or laggard firms) or resource allocation across firms and sectors (Table 3.1 above). Based on its expert judgement, the council could complement the portfolio of public policies mapped in the framework considering Thailand’s economic structure and specific challenges (as discussed in Box 3.2 above). Once a customised framework is agreed upon, the council could disseminate it and explain its application in a productivity bulletin (recommendation 3, phase 1), allowing both member and non-member institutions to rely on it for their analytical work, following the approach of Ireland's NCPC (Box 1.10 above). In practice, the framework could help sectoral institutions select the thematic focus of their ongoing and planned work without being overly restrictive and help them consider a range of policy options in their advice that are tailored to the productivity determinants identified in their analyses.
Phase 2: For producing joint analytical work at the council level (recommendation 3, phase 2), the analytical framework can help select the thematic focus for outputs, including the recommended bulletins and joint productivity reports, as demonstrated by the Irish NCPC (Box 3.3). It can also support developing policy recommendations that link findings on productivity determinants to suitable policy actions. The framework could be reviewed and updated regularly based on new relevant research and the expert judgement of the council.
The NCPC has been using analytical frameworks to guide its work on productivity for over twenty years. In 2024, the institution made a significant shift from its longstanding pyramid framework to a new Competitiveness and Productivity Framework, which was jointly developed by Council members and the secretariat. This new framework views competitiveness and productivity as intertwined and mutually reinforcing concepts (Figure 3.5).
The new framework responds to a changing global context that influences the environment in which Irish firms and households operate, shaped by both long-term economic trends and a series of economic shocks. Among the long-term trends are the dual transitions towards a green and digital economy, which require substantial investment, the large transfer of intellectual property to Ireland over recent decades as well as rising geopolitical tensions that impact international trade, enterprise location decisions and financial markets. These factors have increasingly come to the forefront of economic considerations. Ireland, as a small open economy, has been affected by major international shocks, including Brexit, the COVID-19 pandemic and the energy crisis triggered by Russia’s war of aggression against Ukraine. Additional challenges include the return of inflation and high interest rates after an extended period of declining capital costs and rising asset prices.
The framework defines six core areas as foundations for competitiveness and productivity
Drawing on the institution’s experience with providing applied policy advice and considering the changing economic environment, the drivers of competitiveness and productivity were reassessed.
This led to the identification of six core areas, which are regarded as key enablers of fostering sustainable growth and enhancing the well-being of Irish society.
Business environment: Ease of doing business, regulations affecting economic agents, and public support for firms.
Macroeconomic sustainability: The ability of public institutions to provide a stable and certain fiscal and monetary environment.
International environment: Functioning international trade, supply chains and capital and financial markets, based on multilateral agreements.
Technology and innovation: Support for research, development, and innovation, absorptive capacity for technology and promotion of technology spillovers.
Education and skills: Access to a highly skilled workforce supported through a strong education system, lifelong learning, flexible responses to labour and skill demand, facilitation of work permits and promotion of flexible reallocation to improve skill matching.
Infrastructure: Facilitation of participation in goods and factor markets, sustainable access to energy and water, state-of-the-art connectivity for economic agents (including broadband) and the provision of public capital, including housing.
Source: National Competitiveness and Productivity Council Bulletin 24-2 Ireland’s Competitiveness and Productivity Framework (NCPC, 2024[64]).
Mapping policy core areas with productivity determinants
The NCPC provides guidance on how each of the six core areas is linked to specific determinants, providing a basis for the consideration of related policy instruments and practical application.
Applying the framework to guide the development of outputs
The NCPC is applying the new Competitiveness and Productivity Framework to develop the annual Ireland’s Competitiveness Challenge report. The 2024 report is the first edition developed using the new framework, implementing it by dedicating a chapter to each core area. Although the chapters cover a wide range of competitiveness and productivity drivers within their respective thematic fields, they define certain focus areas that are prioritised in a given year.
The chapter on technology and innovation provides an example of how the framework is applied in practice. It begins with a general update on several of the determinants shown in Table 3.4, including investment in research, development and innovation by Irish firms with different characteristics, the uptake of an R&D tax credit support instrument, the progress of enterprise digitalisation in terms of digital intensity across different industries and firm size classes and obstacles to ICT investment. It moves on to an in-depth focus on the adoption of AI, discussing various indicators and reviewing studies on its economic impacts, including the labour market and energy consumption. Each chapter concludes with policy recommendations (see Box 3.4 below).
Source: National Competitiveness and Productivity Council Bulletin 24-2 Ireland’s Competitiveness and Productivity Framework (NCPC, 2024[64]), Ireland’s Competitiveness Challenge 2024 report (NCPC, 2024[65]).
Recommendation 13: Develop more specific policy recommendations that link advice to existing policy settings and assign responsibility for uptake and implementation to specific institutions. Discuss recommendations with potential recipients in advance to ensure relevance and feasibility and promote the attention of all relevant stakeholders upon publication.
The relevance, specificity and targeting of the recommendations can be improved by linking the recommendations to the existing policies and consulting with the institutions responsible for implementation. Several actions could be considered:
Enhance the way recommendations are formulated. Clearly state an objective related to a productivity driver, detail a policy action or instrument to address it and identify the institutions responsible for acting. Pro-productivity institutions in OECD countries have developed approaches to maximise the practical relevance of their policy advice. For instance, Ireland’s NCPC holistically considers the full range of productivity drivers mapped in its analytical framework when developing recommendations, defines specific policy instruments to pursue the objective and assigns responsibility for action. Germany’s Council of Economic Experts maps each policy recommendation with an identified challenge and a corresponding goal, while also backing it up with an in-depth analysis, for instance on options for policy instruments, in the annual report (Box 3.4).
Further strengthen the specificity of policy advice by relating it to assessments and evaluations of existing plans, policies and instruments. Pro-productivity institutions in some OECD countries, including the U.S. Council of Economic Advisers, the Australian Productivity Commission and Chile’s National Evaluation and Productivity Commission base their advice on assessments and evaluations of policy settings and instruments (see Box 3.8 in the following section).
Consult with the government stakeholders to which recommendations are addressed to facilitate the uptake and implementation of recommended policy actions. Direct consultations between recommending institutions and implementing stakeholders, both during the drafting and upon publication of the recommendations, can strengthen the impact of pro-productivity advice by ensuring a clearer understanding of each stakeholder's capacities and responsibilities. For the release of major outputs, a dedicated launch event could be organised, inviting all relevant stakeholders to ensure their awareness and engagement. Ireland’s NCPC is an example of an institution that uses strong communication channels with the recipients of recommendations during their development. It also employs a formal procedure to ensure government attention to its advice upon release (see Box 3.7 below).
Ireland’s National Competitiveness and Productivity Council: structuring recommendations around objectives, measures and responsibility
The NCPC provides policy recommendations to the Irish government annually following a structured process. Each year, Ireland’s Competitiveness Challenge report presents twenty recommendations, necessitating strict prioritisation by the council and its secretariat. These recommendations are elaborated in collaboration with relevant government stakeholders, ensuring their relevance and feasibility from the outset.
Organised around the six core areas of the analytical framework, the recommendations aim to provide a holistic coverage of productivity drivers, with three to four recommendations per area. For example, in the 2024 edition of the Competitiveness Challenge report, the chapter on the core area technology and innovation provided four policy recommendations, building on the chapter’s analytical focus (detailed in Box 3.3 above). One of these recommendations focuses on technology adoption by SMEs and represents a good example of the NCPC’s approach to formulating advice. The typical structure of NCPC recommendations consists of three parts.
First, there is a call to action accompanied by a stated objective:
“The Council recommends that ambitious action be undertaken to support the take-up of advanced technologies – including AI – by enterprise, particularly by SMEs.”
Second, it details one or more concrete policy measures or instruments to be implemented:
“This should include:
The introduction of an investment incentive, particularly for SMEs, to operate alongside the R&D Tax Credit, that could be availed of to support advancement in the form of new-to-firm investments, including those related to digitalisation and the take-up of advanced technologies.
Amendments to the outsourcing limits, and the maximum limit allowable under the Science Test, to incentivise collaboration and drive take-up of the R&D Tax Credit, by SMEs in particular;
The introduction of a pre-approval mechanism for SMEs when engaging with the R&D Tax Credit, to minimise uncertainty – particularly regarding the eligibility of projects involving emerging technologies – and to streamline the application process.”
Third, it assigns responsibility for action to specific entities, such as those at the Department (Ministry) level:
“Responsibility: Department of Finance, Department of Further and Higher Education, Research, Innovation and Science, Department of Enterprise, Trade and Employment.” (NCPC, 2024[65]), p.51
Following the release of the report, the twenty recommendations are brought directly to the Government's attention and considered at a formal government meeting to discuss their potential uptake and implementation.
Germany’s Council of Economic Experts: structuring recommendations around challenges, goals and policy measures
The German Council of Economic Experts (CEE) publishes an annual report that takes stock of and interprets Germany’s economic development. The report always includes a chapter on national productivity trends and also provides recommendations to policymakers that are organised along identified key challenges (CEE, 2024[66]; CEE, 2024[67]).
The CEE presents a concise overview of its recommendations. Figure 3.6 shows some of the recommendations from the 2023/24 annual report, focusing on the identified challenges of low potential output growth and fragmentation and low liquidity of capital markets. Each challenge is mapped to goals that should be targeted. In the case of low potential output growth, these goals are to strengthen innovation, expand aggregate hours worked and mobilise investment. To pursue these goals, several policy actions are formulated. For instance, to further strengthen innovation in Germany, the CEE recommends tax incentives for R&D, supporting AI research and strengthening the school and higher education system. While these recommendations are high-level, they reference items in the national report that explain how such measures could be designed and implemented. For instance, for R&D tax incentives, the CEE references an item that elaborates on increasing subsidy rates by 20 percentage points for small enterprises and 10 percentage points for medium-sized ones to address the relatively low R&D intensity among SMEs in Germany (CEE, 2024[68]).
Mapping challenges, with goals and measures, backed by detailed explanations in so-called ‘ITEMS’
Note: This excerpt from the CEE website shows two of five thematic blocks of challenges addressed in the 2023/2024 Report. The German version of the website allows users to navigate directly to the linked background items elaborated in the report.
Source: German Council of Economic Experts (CEE, 2024[68]), https://www.sachverstaendigenrat-wirtschaft.de/jahresgutachten-2023.html
Several plans directly or indirectly target boosting productivity growth
The impact of productivity analysis on policymaking depends on the extent to which the results of the analysis are used to shape policy. Policymaking in Thailand is guided by a comprehensive, yet complex, national planning system in which several high-level and operational plans directly or indirectly target boosting productivity growth (Figure 3.7).
In 2018, Thailand introduced its first twenty-year National Strategy for the period 2018-2037. The National Strategy is the primary plan, serving as an umbrella for all other plans. It defines the overall development framework with a vision for 2037, which includes the ambition to reach high-income status over this timeframe. The strategy covers various dimensions of development, including security, stability, economy, health, society and the environment (NESDC, 2019[69]). The National Strategy mentions productivity on several occasions, including as a development challenge, an indicator of competitiveness and an objective in the context of sectoral transformation and inclusive growth.
Second-level plans are designed to translate the National Strategy into applied objectives and milestones. Among several second-level plans, the National Economic and Social Development Plan (NESDP) is notable (see Box 3.5 below). Introduced over sixty years ago, long before the National Strategy, its five-year iterations have provided high-level economic and social policy guidance, setting directions and goals for specific sectors and policy areas. The substance of the NESDP is anchored in assessments of Thailand’s situation at the starting date, ongoing trends and international framework conditions. The formulation is based on the analysis of the Office of the NESDC and consultations with government stakeholders. Since 2023, the 13th edition has been under implementation (NESDC, 2023[70]) (see Box 3.5 below). Other second-level plans that emphasize policies to boost productivity include the National Reform Plan, a major ad-hoc initiative aimed at comprehensive structural and administrative reforms under implementation until 2022 (see Box 3.6 below) and twenty-three Master Plans with thematic focus, such as the Special Economic Zones or R&D.
Third-level plans are designed to apply the agenda of second-level plans to all sectors of the Thai economy. Based on the NESDP’s targets, milestones and strategic plans, third-level plans detail policy actions in a more granular and action-oriented manner. Third-level plans are mostly developed at the ministerial level and are generally thematically focused, implying that some ministries have several plans under implementation simultaneously. All ministries with in-house pro-productivity institutions also formulate plans on productivity-relevant policy areas. The Ministry of Labour has a dedicated Labour Productivity Action Plan, while the Ministry of Industry is responsible for the next edition of the Industrial Productivity Plan (see Figure 3.7).
Source: OECD elaborations.
The analysis focuses on the 13th edition of the National Economic and Social Development Plan, which is currently under implementation. The goal is to assess to which extent the national policy agenda on productivity is informed by analytical insights and policy advice. Focusing on the NESDP has the advantage that its substance is neither as high-level as the National Strategy nor as detailed and fragmented across institutions and areas of responsibility as third-level plans tend to be. Moreover, the implementation period of the 13th NESDP started in 2023, making its substance highly relevant for the current policy agenda.
Studying the links between the recommendations of pro-productivity institutions and the NESDP is connected to some challenges. First, the NESDP does not specify which analyses and assessments of pro-productivity institutions are consulted to inform its agenda. Second, even if analytical insights and recommendations are considered, it is not clear how they are selected and prioritised. Therefore, the analysis focuses on observable information and studies in a qualitative way to what extent the productivity-enhancing policies mentioned in the plan correspond to the recommendations of the pro-productivity institutions. To implement this comparison, the more than two hundred and fifty sub-strategies detailed in the NESDP are examined concerning their inclusion of pro-productivity policies outlined in the extended OECD framework (Table 3.3 above).
Furthermore, the interpretation of the results of the text-based analysis is limited in several aspects. As the analysis is based on the plan, it does not consider whether the ambitions are implemented. Moreover, although the NESDP is the most important central planning instrument, focusing solely on a single level-two document might neglect more specific guidance on policies elaborated in third-level plans. Nonetheless, given the crucial role of the NESDP in the Thai planning and policymaking system, the analysis yields important insights that are presented below.
Preparation of the 13th Plan
Thailand's National Economic and Social Development Plan (NESDP) is prepared by the National Economic and Social Development Council (NESDC). The 13th edition came into force in the autumn of 2023. For its preparation, the NESDC considered the potential impacts of global, regional and domestic trends and evaluated the challenges and opportunities for national economic and social development. The plan adopts a comprehensive approach, considering various elements of national development in line with the guidance provided by the National Strategy before setting goals for a five-year timeframe.
As a development context, the 13th edition considers ongoing challenges related to the COVID-19 pandemic, rapid technological advancements including AI, worsening climate change, an ageing society and mounting geopolitical tensions. Structural barriers to higher economic growth, including the issue of sluggish productivity growth, are also emphasised.
Translating strategy into policy actions in three steps
The Plan is supposed to translate the National Strategy into operational actions while defining priorities for the five-year period. This process involves three steps. First, five main development targets for the five-year period are formulated. In the 13th Plan, these targets are:
1. Restructuring the manufacturing and service sectors towards an innovation-based economy
2. Developing human capital for the new global era
3. Creating a society of opportunities and fairness
4. Ensuring the transition of production and consumption towards sustainability
5. Enhancing Thailand's capability to cope with changes and risks in the new global context
Each target is assigned indicators to make progress measurable. For instance, for the second target, the chosen indicator is the Human Achievement Index. The plan states both the onset level of the indicator and a target level for the end-date of the implementation period.
In the second step, thirteen development milestones are defined to connect the targets with a concrete agenda on the most pressing development issues linked to sectors and policy areas. Milestones can be allocated to several targets at once (Table 3.5).
Source: Based on (NESDC, 2023[70]).
A third step connects each milestone to a dedicated strategic plan. Strategic plans include a review of the past development situation related to the milestone, the formulation of development goals, the setting of targets with assigned indicators, a strategy map, detailed development strategies and sub-strategies. For each milestone, there are up to ten different subordinate strategies with an average of three sub-strategies. Taken all together, the 13th Plan includes over three hundred sub-strategies. Most of them are specific and detail concrete policy actions.
Productivity in the 13th NESDP
Productivity is mentioned several times throughout the Plan. It is cited as an economic indicator in the section on the national development context, providing the overall rationale for the policy actions. Productivity is also explicitly linked to one of the main development targets: developing human capital for the new global era. In this context, strengthening human capital development is described as a precondition for increasing labour productivity levels in the manufacturing and service sectors. Productivity increases are also set as goals in a few milestone-specific strategic plans, particularly regarding agricultural transformation and workforce capability development (Table 3.6). However, most milestones that include productivity-relevant sub-strategies do not present productivity targets or metrics to track the Plan’s effectiveness or mention productivity explicitly at all.
Implementation mechanisms
The 13th Plan has several mechanisms to strengthen implementation. These include outcome-based integration mechanisms, function-based mechanisms and area-based mechanisms. The NESDP is integrated into the annual fiscal expenditure formulation to ensure that budget allocation aligns with defined goals. Local agencies' budget administration must also act in line with the NESDP. The tool for translating the NESDP policy agenda into department and sector policy action are the third-level plans.
Source: The 13th National Economic and Social Development Plan (2023-2027) (NESDC, 2023[70]).
Thailand’s National Reform Plan was an initiative aimed at initiating structural and administrative reforms in accordance with Chapter 16 of the Thai Constitution and Section 5 of the Reform Implementations and Procedures Act. The plan was initiated in 2017 and under implementation from 2018 to 2022. The National Reform Plan was prepared and revised by eleven national reform committees focusing on one reform area respectively (later expanded to 13 reform areas). It was approved by the Chairman of the National Reform Committee, the National Strategy Committee and the Cabinet. The plan spanned across political, legal, administrative and economic reforms. Its agenda should prioritise reforms with clear goals and measurable impact for Thai citizens.
With the release of the National Strategy in 2018, the National Reform Plan became a second-level plan, prompting the preparation of a revised version. The National Strategy Committee was mandated to ensure consistency of the reforms with the goals of the National Strategy and alignment with other second-level plans like the thematic Master Plans.
Reform agenda on productivity and pro-productivity institutions
The economic block of the plan covered three main issues:
Increasing Thailand’s competitiveness
Fostering equality and inclusive growth
Reforming economic and institutional processes and systems
The Reform Plan associated the ambition to increase Thailand’s competitiveness with accelerating productivity in key industries and transforming the economy towards more knowledge-intensive activities. It linked these ambitions to policy actions to enhance human skills, investment in science, technology and innovation and the improvement of regulations to facilitate the investment and business environment.
Under the third issue, a comprehensive agenda to reform economic institutions was promoted, aiming to enable them to drive economic policies more effectively. This encompassed the reform of institutions responsible for productivity promotion. However, the Plan remained unspecific on how the work of pro-productivity institutions could be strengthened. Accordingly, it did not lead to important changes of the setup and cooperation practices of pro-productivity institutions.
Source: National Reform Plan (NESDC, 2020[71]).
Implementation strategies align only with some of the policy recommendations provided by pro-productivity institutions
The milestones of the 13th NESDP include over 250 sub-strategies. Many of them are detailed and specific and refer to productivity-relevant policies. The analysis of the sub-strategies finds that over 100 of them refer to at least one pro-productivity policy. Some sub-strategies are particularly comprehensive and mention several productivity-relevant policies simultaneously.11 Twelve out of thirteen milestones include at least one productivity-relevant sub-strategy. Nevertheless, within these twelve milestones, almost sixty percent of the productivity-relevant sub-strategies fall under one of the following five milestones (in order of frequency):
Milestone 3: Thailand is the World’s Important Electric Vehicle Manufacturing Base
Milestone 4: Thailand is a High-Value Medical and Wellness Hub
Milestone 6: Thailand is ASEAN’s Hub for Digital and Smart Electronics Industry
Milestone 7: Thailand Has Strong, High-Potential and Competitive SMEs
Milestone 5: Thailand is the Region’s Key Strategic Trade, Investment and Logistics Gateway
The concentration of pro-productivity sub-strategies under Milestones 3, 4 and 6, which focus on selected industries, suggests that the Thai policy agenda to boost productivity depends on strategies for sectoral transformation towards higher-value-added economic activities. This is particularly evident for incentive-based policies. Around one-third of all incentive-oriented sub-strategies belong to one of the three milestones focusing on electric vehicle and electronics manufacturing or medical and wellness activities.
In terms of policy instruments, the general approach of sub-strategies broadly corresponds to the policy recommendations by Thai pro-productivity institutions. Like the recommendations, the 13th NESDP places a strong emphasis on capabilities rather than incentives, which account for two-thirds of the proposed policies. For the smaller group of incentive-oriented sub-strategies, the Plan’s stronger focus on within-firm productivity improvements rather than on incentives for resource (re-)allocation is consistent with the recommendations (Figure 3.8, Panel A). Moreover, fiscal incentives are the most mentioned incentive tool in both the recommendations and the Plan. Policy areas identified as weakly studied in Thai productivity analysis, such as barriers to services trade competition, receive relatively little attention in the Plan as well.
Differences exist between the 13th Plan and the examined policy recommendations in the relative attention given to various incentive- and capability-focused policies. The Plan dedicates several sub-strategies to Thailand’s Special Economic Zones (SEZs) whereas very few policy recommendations from Thai pro-productivity institutions explicitly refer to the SEZs. Similarly, environmental policy-related regulations and incentives play a role in the Plan, while they are absent from the examined recommendations.
In the area of pro-competition measures, the business environment and PMR reform are covered in more detail in the Plan. Frequent themes are simplifying licensing procedures and reducing the bureaucratic burden for firms. Similarly, strengthening fairness in the business environment by enhancing integrity and anti-corruption policies is emphasised. Less attention is given to other levers of competition, especially upgrading and adapting antitrust measures.
To strengthen capabilities that facilitate productivity improvements, the NESDP places a stronger focus on the capital channel rather than the labour channel. This stands in contrast to the recommendations, which emphasise human capital and skill development (the labour channel) as the most important policy area (Figure 3.8, Panel B). A recurring theme throughout the NESDP is the provision of high-quality infrastructure, with particular emphasis on transport and logistics as well as ICT infrastructure.
Promoting international openness in knowledge creation and transfer, which directly addresses multifactor productivity, is a priority in both the recommendations and the Plan. However, the Plan more frequently emphasises knowledge creation, for instance, through research collaboration and links between science and innovation-driven enterprises, whereas the recommendations focus more on applied knowledge diffusion by creating better framework conditions for FDI.
Within the labour channel, the strongest focus lies on adult skills and life-long learning, as in the recommendations. However, rather than emphasising foundational skills and the education system in second place, the Plan places greater emphasis on labour mobility and creating productive job-to-worker matches. Addressing informality plays a role like in the recommendations.
In conclusion, there is some high-level alignment between the recommendations from pro-productivity institutions and the NESDP productivity agenda. However, this correlation does not indicate a close consideration or integration of specific policy recommendations in the drafting of the detailed sub-strategies. The findings suggest that there is potential to better leverage productivity-related insights and recommendations in shaping Thailand’s central planning.
A. Relative frequency of policies in incentive-focused sub-strategies (grouped by target)
B. Relative frequency of policies in capability-focused sub-strategies (grouped by transition channel)
Source: OECD elaborations based on NESDC (2023[70]) and André and Gal (2024[1]).
Thailand has a comprehensive yet complex three-layer planning system. The five-year National Economic and Social Development Plan (NESDP) is the central second-level planning instrument, connecting the twenty-year National Strategy, guiding all policies in Thailand, with operational third-level plans at the ministerial level. The 13th Plan, under implementation between 2023 and 2027, comprises five overarching development targets, including ambitions for sectoral transformation to build strategically prioritised manufacturing and service industries and develop human capital for the new global era. The five development targets inform thirteen development milestones, each with dedicated goals, targets, indicators, strategies and sub-strategies. Productivity is referenced throughout the 13th Plan, particularly in describing Thailand’s current economic development and informing some of the strategies. However, only two of the thirteen milestones, workforce development across the economy and agricultural transformation, use productivity indicators to measure the Plan’s progress.
Most sub-strategies do not explicitly refer to productivity enhancement but many of them focus on policies that could be important for boosting productivity growth. An analysis of the approximately 250 sub-strategies, using an equivalent approach as for the policy recommendations of Thai pro-productivity institutions, indicates that over 100 of them propose policies potentially strengthening productivity growth. The focus of these sub-strategies broadly aligns with the themes of the recommendations provided by Thai pro-productivity institutions. Both the recommendations and the 13th NESDP emphasise capability-based policies far more frequently than incentive-based policies, with similarly infrequent use of non-financial incentives. However, it is unclear whether the high-level coherence between the policy recommendations of pro-productivity institutions and the 13th NESDP is systematic. The process for incorporating policy advice into the drafting of the Plan is not well defined and differences exist at the level of specific policies.
The productivity-relevant sub-strategies in the 13th NESDP cover a limited share of firms and economic activity in Thailand. This is because many of them are assigned to milestones focusing on development strategies for selected target industries, such as electric vehicle manufacturing (Milestone 3) and the digital and smart electronics industry (Milestone 6). Tying ambitions for productivity enhancement to industrial strategies may introduce significant uncertainty. Moreover, this approach contrasts with insights that aggregate productivity gains can be realised through better policy settings across sectors and for firms both at and below the productivity frontier.
These findings point to the need for making the productivity agenda in the forthcoming 14th edition of the National Economic and Social Development Plan more explicit and broaden it in terms of industry coverage and policy options to address various productivity drivers.
Recommendation 14: Include a productivity agenda in the 14th National Economic and Social Development Plan that addresses Thailand’s productivity challenges across sectors and policy areas. Systematically map challenges, drivers and policies in the formulation of strategies.
The upcoming 14th Plan could include a productivity agenda that addresses Thailand’s productivity challenges. It should systematically map the identified challenges with drivers and policies to address them. Policies detailed in the strategies and sub-strategies of the next plan should set incentives and strengthen the capabilities of firms to increase their productivity and facilitate the reallocation of resources towards more productive firms. The recommended analytical framework can guide the variety of relevant policy areas and options. The agenda should also define suitable indicators and metrics to track progress on a more disaggregate level (on which see also recommendation 4). Going forward, a well-structured productivity agenda in key national planning instruments could facilitate the alignment of policy priorities with resources. Strategic priorities for budget allocations could be better defined and linked to key indicators. For instance, a concrete step in this direction could be specifying priorities and indicators for productivity improvements across sectors in the Annual Strategic Budget Allocation Plan.
Recommendation 15: Ensure that the productivity agenda for the next planning cycle is explicit and comprehensive through the council’s expert analysis, advice and evaluation of the impact of productivity-related aspects in the current 13th National Economic and Social Development Plan.
Based on analytical outputs from its member institutions, external research and future joint work, the council could advise on policy actions to revive productivity growth, supporting the Office of the National Economic and Social Development Council in drafting the 14th Plan. The council may select its policy advice by drawing on the recommended analytical framework and setting priorities using its expert judgement, considering the expected impact of potential reforms, gaps between current policies and best practices and implementation constraints. The council could also provide the NESDC with assessments and evaluations on the effectiveness of productivity-related strategies of the 13th Plan and related policy settings. Lessons and advice could be conveyed in the format of the bulletins (see recommendation 3, phase 1). Pro-productivity institutions across OECD countries, including the United States Council of Economic Advisers, the Australian Productivity Commission and Chile’s National Evaluation and Productivity Commission, conduct evaluations in productivity-related policy areas (Box 3.8). To ensure effective communication between productivity experts and policymakers, some OECD countries rely on formal exchanges between their pro-productivity institutions and government departments. For example, Ireland’s NCPC receives written responses from the government on every recommendation provided in its annual report (Box 3.7).
After the NCPC submits its Competitiveness Challenges report, the Irish Government formally responds to it in writing within two months. The response, published by the Department of the Taoiseach (Head of the Irish Government), addresses each of the twenty recommendations individually. A typical response may begin with an acknowledgement of the challenge and a general endorsement of the advice if the government agrees. It often further elaborates on ongoing and planned government initiatives to address the issue. It sometimes provides an outlook on how new elements of the recommendations could be adopted or incorporated into the government’s programme of work (Government of Ireland, 2023[72]).
To assess the medium-term implementation progress on its recommendations, the NCPC plans to undertake a multi-annual retrospective exercise covering all recommendations formulated since 2020. This exercise aims to review government actions taken beyond the detailed responses and may serve both to further tailor policy advice and to exercise scrutiny over government actions.
Source: NCPC presentation (NCPC, 2024[73]).
The United States Council of Economic Advisors’ examination of the Child Tax Credit
The United States Council of Economic Advisers (CEA) evaluates the impact of existing policies adjacent to productivity to inform economic advice to the U.S. President. One example of this is the blog post The Anti-Poverty and Income-Boosting Impacts of the Enhanced Child Tax Credit (CTC), which studies the effect of the temporary Child Tax Credit expansion on child poverty rates and income levels. The assessment employs a within-year comparison of data from the U.S. Census Bureau to isolate the impact of the CTC from other economic factors. The analysis indicates that the CTC is associated with a reduction in child poverty rates and increased median family income in 2021, effects that disappeared when the CTC expired in 2022 (CEA, 2023[74]).
The findings from this post were incorporated into the Annual Report of the CEA, linking the CTC to policy areas relevant to productivity gains in the broader economy. One section in the report discusses how government investments in young children, such as the CTC, can strongly enhance human capital formation in the first years of life and thereby lifetime productivity. Another section on housing affordability used insights from the CTC analysis to highlight how financial assistance programmes can help low-income families to maintain stable housing by alleviating other financial burdens (CEA, 2024[75]). Housing affordability can boost productivity in the broader economy by enabling labour mobility and efficient matching of jobs and workers.
The Australian Productivity Commission’s evaluation of Australia’s occupational licensing policies
The Australian Productivity Commission (APC) has conducted extensive policy reviews and evaluations to develop recommendations and a government roadmap as part of a five-year Productivity Inquiry report, published in 2023. In nine volumes, the APC evaluated individual policies and broader policy settings. One example is the in-depth review of Australia’s occupational licensing and registration system, featured as part of a chapter on a more productive labour market. The APC reviews links between occupational licensing and productivity. It also discusses past occupational licensing reforms in Australia and identifies remaining challenges in two main areas: the effectiveness of licensing in improving safety and the trade-off between licensing and competition/market entry in relation to scope of practice and boundaries between different occupations. In these areas, the report proposes various government actions (APC, 2023[76]).
Chile’s National Evaluation and Productivity Commission’s stocktaking of investment process permits
In 2023, Chile’s National Evaluation and Productivity Commission (CNEP) reviewed and analysed critical sectoral permits for investment projects in Chile. The evaluation report explores ways to better align an investor-friendly, growth-enhancing investment environment with societal interests, including national security, public health and environmental protection. The analysis led to the identification of over 400 processes affecting investment proceedings and over 300 sectoral permits that require directives from authorities to advance an investment project.
By applying a classification framework, the CNEP differentiated the permits and identified over 60 high-priority ones throughout the investment life cycle that are essential for investment projects to materialise. Additional data were gathered on their relevance and potential obstacles associated with the permits. The project found a strong increase in processing times for complex permits, higher rejection rates, and more pending procedures. It identified room for improving permit process management and derived a detailed set of measures, including a targeted intervention strategy based on permit types and several operational improvements (CNPC, 2023[77]).
Note: Phase 1 refers to the short term and could be aligned with the implementation period of the 13th National Economic and Social Development Plan. Phase 2 refers to the medium term and could begin with the next planning cycle. Recommendations 1, 2, 13, 14 and 15 do not require specific sequencing in two phases.
Source: OECD elaborations.
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← 1. The first dimension, which distinguishes between incentives and capabilities, is informed by Andrews, Criscuolo and Gal (2016[5]) and Nicoletti, von Rueden and Andrews (2020[7]), who established the distinction to describe factors affecting the technology adoption of firms.
← 2. The focus on the supply side aligns with previous work in the OECD Economics Department, which aims to quantify the impacts of structural reforms on output using a production function approach (Égert and Gal, 2017[6]).
← 3. This dimension is informed by the insights generated by OECD (2015[3]), Andrews, Criscuolo and Gal (2015[4]) and Andrews, Criscuolo and Gal (2016[5]) on diverging productivity levels between frontier and laggard firms and resource allocation between the two.
← 4. The analysis does not identify priorities for boosting productivity, as prioritising policy actions requires further steps involving context-specific expert judgement and political decisions, which go beyond the use case and scope of analytical frameworks.
← 5. Institutions with a narrower mandate focused on specific policy areas, for example science and higher education, might limit the scope of their recommendations to those areas. However, they should still examine a variety of drivers within these fields and consider interactions and complementarities with other, non-focus areas.
← 6. For PIER discussion papers, the final section of each paper, which presents discussion and policy implications, is analysed to identify policy messages with a recommendatory character.
← 7. Examining two exemplary recommendations by Thai institutions illustrates the application and benefits of the analytical framework. One recommendation advocates for stepping up tax exemptions for startups to promote the emergence and scaling of innovation-driven enterprises. Another recommendation highlights the need to educate managers and workers of small firms about the benefits of adopting advanced technology in production processes to strengthen their productivity. While a simple thematic classification might suggest that both recommendations aim to strengthen productivity by creating and diffusing innovation, this coding would fall short of distinguishing their different approaches. The first recommendation suggests using fiscal incentives to promote innovation. The second relies on strengthening firm capabilities through knowledge diffusion, enabling the adoption of technology and its productive use. Moreover, the first recommendation proposes a policy open to new market entrants, regardless of their position relative to the productivity frontier. In contrast, the second recommendation rather targets laggard firms, as firms at the productivity frontier do not tend to lack knowledge of relevant technologies or face challenges with adoption.
← 8. As shown in Table 3.2, the number of recommendations in the examined outputs varies greatly. To avoid disproportionately weighting publications with more recommendations, relatively higher weights is assigned to publications with fewer recommendations. Twenty-nine policy recommendations are too unspecific to classify into any instrument class, so they are omitted in the analysis.
← 9. Consider two policy recommendations from Thai institutions on strengthening competition to illustrate the difference between specific and unspecific advice. One recommendation from 2023 suggests expanding foreign trade partnerships in the metals sector. It aims for Thai businesses to expand trade partnerships, with government support through network creation in the ASEAN region, which is experiencing growth in investment and production capacity. While the objective is to deepen international trade links, the approach to fostering network creation is unspecific and not actionable, leaving the term 'network creation' undefined. In contrast, a 2020 recommendation advises increasing competition by integrating foreign firms into the Thai service sector, in line with the AEC framework on services. It specifies concrete actions, such as gradually lifting restrictions on foreign firms in telecommunications currently required to operate on a resale basis, as well as ownership restrictions for education and health facilities and performance restrictions for foreigners in professional services. Here, the objective, policy context and required actions are clearly detailed.
← 10. There are different ways recommendations can explicitly or implicitly assign responsibility to an institution for implementing a recommendation. One way is to explicitly mention the institution that should be accountable for acting. However, sometimes the specification of the action already implies who is responsible, for instance, when addressing specific acts, regulations or policy instruments that fall within the competence area of an institution. A recommendation can also be automatically addressed when the publication it is part of is directed to a specific, clearly defined institution. If none of these criteria apply, a recommendation can be considered unaddressed.
← 11. In this case, the analysis allows to assign multiple policies to one sub-strategy.