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The Impact of Urban Density on Labour Productivity: Empirical Evidence from Thailand's Major Cities

Author

Listed:
  • Saowaruj RATTANAKHAMFU

    (Thailand Development Research Institute (TDRI))

  • Naparit CHANTAWASINKUL

    (Thailand Development Research Institute (TDRI))

  • Nuttawut LAKSANAPANYAKUL

    (Thailand Development Research Institute (TDRI))

  • Nuttawut Warakorn AWUTPANYAKUL

    (Thailand Development Research Institute (TDRI))

  • Nuttawut Natcha YONGPHIPHATWONG

    (Thailand Development Research Institute (TDRI))

Abstract
This study investigates the relationship between urban density and productivity, specifically wages adjusted for provincial price differences, in four major cities of Thailand: Bangkok, Chiang Mai, Khon Kaen, and Songkla. Utilising the ArcGIS survey of Khon Thai 4.0 data, which measures urban density as the number of inhabitants per grid cell area, we employ the two-stage least squares estimation technique to address endogeneity concerns. Our findings demonstrate that higher urban density leads to an 8.9% increase in individual hourly wages at the 5% significance level. This supports the notion that densely populated urban areas foster enhanced productivity through agglomeration economies and knowledge spillovers. Furthermore, we observe the expected impacts of education, age, and gender on wages. Higher education is associated with an 8.2% increase in wages, highlighting its influence on labour productivity. Age exhibits an inverted U-shaped relationship, indicating that experience and skill development lead to higher wages up to a certain threshold. Male workers earn approximately 5.83% more than their female counterparts, revealing a gender wage gap. Moreover, our analysis reveals contrasting effects of higher urban density on skilled and unskilled workers. Skilled workers experience a significant 15.2% increase in wages, whereas the impact on unskilled workers remains modest at around 1.8%. Additionally, education significantly contributes to higher wages for both skilled and unskilled workers. This study provides valuable policy implications for promoting labour productivity and addressing urban development challenges in Thailand.

Suggested Citation

  • Saowaruj RATTANAKHAMFU & Naparit CHANTAWASINKUL & Nuttawut LAKSANAPANYAKUL & Nuttawut Warakorn AWUTPANYAKUL & Nuttawut Natcha YONGPHIPHATWONG, 2024. "The Impact of Urban Density on Labour Productivity: Empirical Evidence from Thailand's Major Cities," Working Papers DP-2024-12, Economic Research Institute for ASEAN and East Asia (ERIA).
    • Handle: RePEc:era:wpaper:dp-2024-12
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    References listed on IDEAS

    as
    1. Pedro Telhado Pereira & Pedro Silva Martins, 2004. "Returns to education and wage equations," Applied Economics, Taylor & Francis Journals, vol. 36(6), pages 525-531.
    2. Yankow, Jeffrey J., 2006. "Why do cities pay more? An empirical examination of some competing theories of the urban wage premium," Journal of Urban Economics, Elsevier, vol. 60(2), pages 139-161, September.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Urban development; Urban density; Labour productivity; Wage differentials;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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