Changes in Social Welfare due to the Policy of Thai Rubber Price

Abstract

This research was aimed at analyzing the efficiency of price policies on the Thai economic system. Policy efficiency was considered in terms of social welfare. Five rubber price stabilization policies from 1992 to 2016 were studied. Social welfare measurement was based on changes in the producer surplus and the consumer surplus compared to the budget and income from policy implementation. To measure producer surplus and consumer surplus, Thai rubber demand and supply models were produced using secondary information from 1987 to 2016. It was found that policy factors did not affect Thai rubber demand and supply. It could be stated that the price intervention policy did not affect Thai rubber markets. The consumer surplus decreased by 231.15529 billion Baht because rubber was bought at higher prices than the market, while the producer surplus increased by 228.20244 billion Baht because of rubber sold at higher prices than the market. The budget for policy implementation and operation loss amounted to 21.02061 billion Baht. Thus, social welfare lost due to policy implementation for   14 years accounted for 23.973.47 billion Baht, or 1,712.39 million Baht per year. There were three recommended options for Thailand’s rubber price stabilization policies: 1) production policies that decrease plantation area and increase product quality, 2) farmer strengthening support, to serve as a driving mechanism for managing price uncertainty and to add rubber value by providing knowledge, innovation and technology to farmers; and 3) a public role change–from the operator to the director, in particular regarding commercial policies through previous public mechanisms, this would include a role in supporting business operators.