ABSTRACT
Thailand economy is a hybrid model of a wage-difference model and a neoclassical model. This conclusion is consistent with the observation that the country is now facing the middle-income trap. Many countries that are in the transitional period from the developing to the developed stage face political and social instability because of this problem. The middle-income trap during the development process in Thailand carries policy implications. Returning to main themes of poverty, inequality, and growth, growth reduces poverty as a whole, while it has ambiguous effects on inequality whether or not it narrows. When the variance of income distribution increases in accordance with economic development, the degree of inequality may increase. Government policy plays an important role in poverty reduction and decreasing inequality in developing countries. While governments in developing countries are primarily responsible for alleviating poverty and inequality, they need assistance from international institutions.
