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Introduction
For more than a century, it was argued that economic development and growth were associated with the growth of the labor-intensive manufacturing sector (Baumol, 1967; Kaldor, 1966; United Nations Industrial Development Organization (UNIDO), 2009). Services were considered a menial, low-skilled and low-innovative sector (McCredie and Bubner, 2010). Nowadays, the service sector is the fastest growing sector, comprising an increasingly large percentage of employment and enhancement of total productivity. The service sector makes up 47% of the GDP of low-income countries, 53% for middle-income countries and 73% for high-income countries. Evidence shows that services have started to contribute more to economic growth, promote better job creation and reduce poverty to a greater extent than does the manufacturing industry, especially in many developing countries (Ghani and Kharas, 2010). In general, the increase in services' share of GDP has become even more prominent in low- and middle-income countries, growing from 48% in 1997 to 57% in 2015. With services contributing more to output, the corresponding contributions of industry and agriculture to GDP have declined accordingly, and the share of the manufacturing sector fell significantly during this period.
Although many countries have been able to successfully increase the services' portion of their GDP, other countries, including Thailand, are still stuck in the “Medium-Income Trap.” Besides Thailand's already relatively low service sector contribution to GDP compared to other developing countries, the country's service sector contribution is expected to continue to decline even further. In fact, the service sector's contribution, which was 62% in 1990, declined to 58% in 2014 and plunged to only 51% in 2017. The trend is contrary to that of other developing countries, whose service-to-GDP ratio has tended to accelerate. Thus, this represents a challenge for Thailand to overcome.
Within the service sector, tourism and the hospitality industry are the most important components for developing countries such as Thailand (Domingrez and Pholphirul, 2020). Since Thailand is a major tourism destination in the region, with approximately 40 million foreign tourists visiting each year, tourism and the hospitality industry greatly affect related service industries, such as wholesale and retail (23% of the total service sector), accommodation and restaurants (7% of the total service sector) and transportation (9% of the total service sector). In addition, tourism and the hospitality...