Template-Type: ReDIF-Paper 1.0 Author-Name: Michael M. Alba Author-Name-First: Michael Author-Name-Last: Alba Author-Workplace-Name: Economics Department, De La Salle University Title: Why has the Philippines Remained a Poor Country? Some Perspectives from Growth Economics Abstract: Why has the living standard of the Philippines relative to that of the U.S. not risen unlike its Asian neighbors? Using data on national income accounts and the workforce from the Penn World Table (version 6.1) and years of schooling from Barro and Lee (2000) as well as a simple neoclassical model and some empirical methods of analysis employed in growth economics, this paper submits three interconnected answers: The country has been stuck in a low-growth trajectory. It is headed for a low steady-state level of output per worker, which explains its slow rate of long-term growth. Most significantly, its total factor productivity, at 20.9 percent of that of the U.S., is horrendously low, which explains its low convergence point. Improving its TFP is thus the key to solving the country's low living standard. Length: 44 pages Creation-Date: 2007-02 Publication-Status: Published as UPSE Discussion Paper No. DP 2007-01, February 2007 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/63/55 File-Format: Application/pdf Number: 200701 Handle: RePEc:phs:dpaper:200701 Template-Type: ReDIF-Paper 1.0 Author-Name: Benjamin E. Diokno Author-Name-First: Benjamin Author-Name-Last: Diokno Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Economic and Fiscal Policy Determinants of Public Deficits: The Philippine Case Abstract: The large and unsustainable deficits of the early 1980s have reemerged in recent years. This paper aims to answer two questions: What has caused the poor fiscal performance of the Philippines in recent years? Is it the result of unfortunate events, macroeconomic shocks or misdirected fiscal policy? Using time series data and 2SLS estimation method, two measures of public deficits -- the national government account balance (NGAB) and the consolidated public sector financial position (CPSFP) -- were regressed against some macroeconomic and fiscal variables. An important result of the empirical work is that the broader measure, CPSFP, turned out to be the more useful and meaningful one both from the theoretical and policy standpoints. The statistically significant determinants of CPFSP are the following: economic growth rate, inflation, domestic liquidity, capital expenditure, intergovernmental fiscal transfer, and tax effort. Using the narrow deficit concept of NGAB as dependent variable, economic rate and intergovernmental fiscal transfer turned out to be statistically insignificant. Tax effort, defined as taxes as percent of GDP, is the most robust determinant of fiscal deficits, with higher tax effort associated with larger fiscal surplus or lower deficit. But tax effort was largely determined by two episodes to tax changes during the period under study. The contribution of the 1986 tax reform to tax effort is positive and highly significant while that of the 1997 tax reform is negatively and statistically significant. Looking forward, any package of reforms which aim to achieve fiscal sustainability in the Philippines should include a strong component for improving revenue effort. Such component should not only aim to correct existing weaknesses in the current tax system (such as, for example, the narrow tax base owing to the proliferation of fiscal incentives laws) but also improve tax administration. Length: 22 pages Creation-Date: 2007-03 Publication-Status: Published as UPSE Discussion Paper No. 2007-02, March 2007 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/64/56 File-Format: Application/pdf Number: 200702 Handle: RePEc:phs:dpaper:200702 Template-Type: ReDIF-Paper 1.0 Author-Name: Gerardo P. Sicat Author-Name-First: Gerardo Author-Name-Last: Sicat Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Legal and Constitutional Disputes and the Philippine Economy Abstract: The Philippines became independent in 1946 but its legal and constitutional framework was erected in the 1935 Constitution. The 1987 Constitution did little to change these provisions in the midst of economic reforms that were undertaken to improve the legal basis of doing business and promoting economic development. The study first undertakes a review of court cases and the backlogs in the justice delivery system. The heavy backlogs in the justice system which is indicative of a litigious business environment create a drag on overall economic performance. But the economic restrictions that remain in the constitution have played the role of iron economic laws because of their relative permanence in the legal framework. These restrictions contributed to the difficulties experienced in all branches of the government -- executive, legislative, and judicial -- to effect a cohesive economic reform process that could encourage the inflows of foreign capital to raise investment and productivity. Endowed with relatively more capital at the start of independence in 1946 and therefore a likely candidate for head start and sustained growth, the Philippines instead fell behind the high growth economies of East Asia. Length: 56 pages Creation-Date: 2007-04 Publication-Status: Published as UPSE Discussion Paper No. 2007-03, April 2007 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/65/57 File-Format: Application/pdf Number: 200703 Handle: RePEc:phs:dpaper:200703 Template-Type: ReDIF-Paper 1.0 Author-Name: Eirene P. Mesa Author-Name-First: Eirene Author-Name-Last: Mesa Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Measuring Education Inequality In the Philippines Abstract: This paper measures the degree of education inequality in the Philippines. It generates the average years of schooling (AYS) and education Gini coefficients of the Philippines as a whole, and all its regions and provinces to examine the economically-active population's level of educational attainment and the distribution of education. The paper finds that although inequality in educational attainment declined from 1960 to 2000 for the Philippines as a whole, and in all its regions and provinces, there are wide discrepancies in the educational performance of regions and provinces. Using decomposition analysis, it finds that poor provinces have greater education inequality than non-poor provinces and on the national level, women are facing a more equitable distribution of education than males. The regional and provincial data shows that the education Gini index is negatively associated to the average years of schooling and Gross Domestic Regional Product, but positively associated to the income Gini index, poverty incidence and poverty gap. Length: 30 pages Creation-Date: 2007-06 Publication-Status: Published as UPSE Discussion Paper No. 2007-04, June 2007 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/66/58 File-Format: Application/pdf Number: 200704 Handle: RePEc:phs:dpaper:200704 Template-Type: ReDIF-Paper 1.0 Author-Name: Renato E. Reside, Jr. Author-Name-First: Renato Author-Name-Last: Reside, Jr. Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Can Fiscal Incentives Stimulate Regional Investment in the Philippines (An update of empirical results) Abstract: This study updates earlier estimates of the sensitivity of regional investment flows in the Philippines to fiscal incentives – income tax holidays and other fiscal inducements provided by government. All other factors held constant, the strength and significance of the investment-inducing effect of a given set of incentives can be gleaned from the size and significance of proxies used for incentives in investment regression equations. Using regional data, the regressions confirm that proxy variables for incentives are not good predictors for regional investment in the Philippines. The results reinforce previous empirical findings that, consistent with international evidence on the power of incentives, the power of incentives to influence patterns of regional investment within the Philippines is also weak. This reinforces the policy implications of Reside’s (2006) paper – rather than waste resources providing ineffective investment subsidies each region in the country would be better off if the Philippine government streamlined fiscal incentives, raised a sufficient amount of taxes and then procured the productivity-enhancing public goods (access to good education and infrastructure) that really mattered more for investment and investors. Length: 8 pages Creation-Date: 2007-06 Publication-Status: Published as UPSE Discussion Paper No. 2007-05, June 2007 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/67/59 File-Format: Application/pdf Number: 200705 Handle: RePEc:phs:dpaper:200705 Template-Type: ReDIF-Paper 1.0 Author-Name: Loradel O. Capistrano Author-Name-First: Loradel Author-Name-Last: Capistrano Author-Name: Maria Lourdes C. Sta. Maria Author-Name-First: Maria Lourdes Author-Name-Last: Sta. Maria Title: The Impact of International Labor Migration and OFW Remittances on Poverty in the Philippines Abstract: The implications of labor migration and remittances on poverty are becoming a global issue. The Philippines is considered as one of the largest labor-sending countries in the world. There are numerous studies on remittances and migration and how they contribute to poverty reduction. However, the studies particularly done for the Philippines are quite scarce. There are still certain aspects that have not yet been explored. In this paper, we aim to enhance the current and previous studies by examining the impact of migration on poverty using a different theoretical and empirical framework. We also intend to analyze the sole effect of migration on poverty in the Philippines and to utilize three measures of poverty to determine the effects of migration and remittances on the different levels of poverty. Finally, in this study, we only consider the role of Overseas Filipino Workers (OFW). Thus, we use the data on labor migration and remittances on OFWs alone. This paper investigates the impact of labor migration and overseas workers' remittances on poverty reduction in the Philippines using a panel data on the 16 regions in the years 1997, 2000 and 2003. The study identifies and quantifies the individual poverty alleviating effects of the level of labor migration and volume of remittances on the three Foster-Greer-Thorbecke poverty indices –the incidence, depth and severity of poverty in the Philippines. The findings suggest that labor migration and remittance flows exert a negative and significant impact on all three measures of poverty. A 10% increase in per capita remittance and number of labor migrants leads to an approximately 0.4% and 0.2% reduction, respectively, in the proportion of families living below the poverty line. Length: 39 pages Creation-Date: 2007-07 Publication-Status: Published as UPSE Discussion Paper No. 2007-06, July 2007 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/68/60 File-Format: Application/pdf Number: 200706 Handle: RePEc:phs:dpaper:200706 Template-Type: ReDIF-Paper 1.0 Author-Name: Raul V. Fabella Author-Name-First: Raul Author-Name-Last: Fabella Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Emmanuel S. de Dios Author-Name-First: Emmanuel Author-Name-Last: de Dios Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Lacking a backbone : The controversy over the National Broadband Network and Cyber-education projects Abstract: The National Broadband Network (NBN) project and the Cyber Education Project (CEP) are state-initiated programs originally conceived to provide last-mile connectivity and interoperability to all government offices and all public schools, respectively. The backbone service required for this was to be procured from the private sector either from extant backbones or via BOT. When the soft loans from China became available, these two programs became scaled up to include two government-owned backbones. We examine the possible economic rationales for a government backbone and found the scaled-up NBN and CEP severely wanting. The prior question we address is: Does the Philippines need a government-owned backbone? Our answer is: No. Length: 23 pages Creation-Date: 2007-07 Publication-Status: Published as UPSE Discussion Paper No. 2007-07, July 2007 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/69/61 File-Format: Application/pdf Number: 200707 Keywords: NBN, ZTE, NBN-ZTE Handle: RePEc:phs:dpaper:200707 Template-Type: ReDIF-Paper 1.0 Author-Name: Ernesto M. Pernia Author-Name-First: Ernesto Author-Name-Last: Pernia Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Population as Public Interest Abstract: The population issue--now passe elsewhere in the developing world, even in the poorer countries -- remains a durable puzzle in the Philippines. On the one hand, a majority of Filipinos regard rapid population growth as an impediment to socioeconomic development, requiring policy intervention; on the other hand, virtually nothing is being done about it as the government appears immobilized owing to opposition from the conservative Catholic Church hierarchy. Central to the population issue are the negative externalities that sustained high fertility brings to bear on economic growth, the environment, inequality and poverty. These externalities plus the fact that women, particularly in poor households, are having more children than their desired number, as repeatedly shown by surveys, constitute strong grounds for an unambiguous population policy. Population is evidently a public interest issue that the national government must address squarely objection from some religious groups notwithstanding. Length: 20 pages Creation-Date: 2007-09 Publication-Status: Published as UPSE Discussion Paper No. 2007-08, September 2007 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/70/62 File-Format: Application/pdf Number: 200708 Handle: RePEc:phs:dpaper:200708 Template-Type: ReDIF-Paper 1.0 Author-Name: Robert H. Nelson Author-Name-First: Robert Author-Name-Last: Nelson Title: The Philippine Economic Mystery Abstract: The poor economic performance of the Philippines over the long term is a puzzle and an apparent anomaly for the region. The decline in the Philippines' global position from the first part of the 20th century is particularly striking when viewed against the backdrop of rapid income gains in countries of East and Southeast Asia, countries the Philippines used to surpass in terms of physical and human capital. While there have been a number of attempts to explain the puzzle-- difficult geography, macroeconomic policy failures, and corruption-- none are completely convincing either because there are counterexamples or the factors cited are endogenous and derivative. On the other hand, the long-term economic record of the Philippines is strikingly similar to some countries of Latin America, such as Argentina, Mexico, and Peru. This paper advances the hypothesis that the political and economic experience in the Philippines stands in closer proximity to those of countries in Latin America than to Southeast Asia, and that this is rooted in their deep similarity of histories and cultures. In particular, the common Spanish and Catholic colonial history may have given rise to "cultural attitudes that now stand in the way of freer markets and a more successful political democracy". Length: 43 pages Creation-Date: 2007-07 Publication-Status: Published as UPSE Discussion Paper No. 2007-09, July 2007 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/71/63 File-Format: Application/pdf Number: 200709 Handle: RePEc:phs:dpaper:200709 Template-Type: ReDIF-Paper 1.0 Author-Name: Cayetano W. Paderanga, Jr. Author-Name-First: Cayetano Author-Name-Last: Paderanga, Jr. Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Infrastructure in Philippine Development Abstract: Studies linking infrastructure and development support the idea that there are large returns to infrastructure investments. This paper examines the conceptual bases for infrastructure's role and their implementation in the Philippines. Regressions show that capital stock investments have yielded insignificant effects on Philippine output from 1955-2001. A survey of different sectors suggests that poor government management has severely limited the effectiveness of resource mobilization and reduced the rate of return on infrastructure investments in the country. Recent experience indicates that allowing greater private sector involvement may address pressing issues regarding efficiency in provision and funding capabilities until the government develops the ability for effective resource mobilization. It is recommended that the government focus on strengthening future financing capacity to meet expected increases in demand for infrastructure services. Caution, however, must be exercised in the overly liberal provision of performance guarantees as this may lead to significant government expenditure increases in the future. Length: 41 pages Creation-Date: 2007-09 Publication-Status: Published as UPSE Discussion Paper No. 2007-10, September 2007 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/72/64 File-Format: Application/pdf Number: 200710 Handle: RePEc:phs:dpaper:200710 Template-Type: ReDIF-Paper 1.0 Author-Name: Ma. Lourdes A. Sereno Author-Name-First: Ma. Lourdes Author-Name-Last: Sereno Author-Workplace-Name: College of Law, University of the Philippines Diliman Author-Name: Emmanuel S. de Dios Author-Name-First: Emmanuel Author-Name-Last: de Dios Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Joseph J. Capuno Author-Name-First: Joseph Author-Name-Last: Capuno Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Justice and Cost of Doing Business: The Philippines Abstract: The effect of the performance of the judicial system has been thrown into the limelight as the business sector has in various surveys pointed to tits performance as being one of the main obstacles and disincentives to doing business in the Philippines. The channels through which the judicial decisions may affect business behavior are fairly straightforward and may be reduced to two; increased uncertainty and high costs. In order to quantify the perceived effect of the workings of the judiciary on the various economic decisions and on investment in general, a survey of 320 of the top 7000 corporations in the Philippines was conducted in 2001. Our findings show that governance problems are at least as important as economic or financial problems in doing business. Only weak market demand was cited as being more important than corruption, high crime levels, and lack of trust in government laws and policies as important obstacles to doing business. Of more direct relevance to the judiciary, difficulties in settling legal conflicts were the sixth most frequently cited factor affecting business, after high power costs but even more important than poor physical infrastructure and access to credit. Further, the current level of functioning of the legal system has an economic impact equivalent to foregoing at least 6-11 percent of total investment in the economy and foregoing at least one-fourth to one-half of a percentage point (0.25-0.46) of GDP growth annually, or an annual loss amounting to between P7 billion and P13 billion in 1999 alone. These are significant and recurring economic losses attributable to the nature and functioning of institutions and form a strong case for judicial reform. Length: 39 pages Creation-Date: 2007-10 Publication-Status: Published as UPSE Discussion Paper No. 2007-11, Octoberber 2007 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/73/65 File-Format: Application/pdf Number: 200711 Handle: RePEc:phs:dpaper:200711