Welfare measurement on Thai rubber market

Abstract

© Serials Publications Pvt.Ltd. This paper purposed a new welfare measurement using the regime switching approach to capturing the structural change in the welfare along selected period. To estimate the welfare, it is necessary to specify accurate demand and supply equations; therefore, we incorporate the Markov switching model into Seemingly Unrelated regression and purposed the use of Markov Switching Seemingly Unrelated regression (MS-SUR) method to derive the demand and supply equations. To estimate this model, the adaptive Metropolis Hasting is employed in the Bayesian estimation. In this study, we focused on Thai rubber market, and the results show that the model performs well in estimating the demand and supply of rubber. The amount of total welfare in the high growth regime is determined to be 1.75(105) units and approximately 1.28(104) units in the low growth regime. It might be noticeable that an amount of producer surplus is negative in regime 2 as the negative supply curve is obtained. Moreover, we found the consumer surplus to be larger than the producer surplus in the Thai rubber market.