Template-Type: ReDIF-Paper 1.0 Author-Name: Romeo Balanquit Author-Name-First: Romeo Author-Name-Last: Balanquit Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Stable Commitment in an Intertemporal Collusive Trade Abstract: This study presents a more general collusive mechanism that is sustainable in an oligopolistic repeated game. In this setup, firms can obtain average payoffs beyond the cooperative profits while at the same time improve consumer welfare through a lower market price offer. In particular, we introduce here the notion of intertemporal collusive trade where each oligopolist, apart from regularly producing the normal cooperative output, is also allowed in a systematic way to earn higher than the rest at some stages of the game. This admits subgame- perfection and is shown under some conditions to be Pareto-superior to the typical cooperative outcome. Length: 34 pages Creation-Date: 2013-02 Publication-Status: Published as UPSE Discussion Paper No. DP 2013-01, February 2013 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/705 File-Format: Application/pdf Number: 201301 Keywords: game theory Handle: RePEc:phs:dpaper:201301 Template-Type: ReDIF-Paper 1.0 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: Skills, migration, and industrial structure in a dual economy Abstract: A comparative-static model describes the decline of manufacturing in the face of rising overseas employment through a mechanism other than the Dutch Disease. Instead it is competition for skilled labour and the relative ease in producing skills that affect the size of the manufacturing sector, including its employment of unskilled labour. Length: 21 pages Creation-Date: 2013-03 Publication-Status: Published as UPSE Discussion Paper No. 2013-02, March 2013 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/706 File-Format: Application/pdf Number: 201302 Classification-JEL: O14, O15 Keywords: deindustrialisation, manufacturing and services sector, migration, skills Handle: RePEc:phs:dpaper:201302 Template-Type: ReDIF-Paper 1.0 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: Jeffrey G. Williamson Author-Name-First: Jeffrey Author-Name-Last: Williamson Author-Workplace-Name: Harvard University and University of Wisconsin Title: Deviant Behavior : A Century of Philippine Industrialization Abstract: Recent work has documented industrial output growth around the poor periphery from 1870 to the present, finding unconditional convergence on the leaders long before the modern BRICS and even before the Asian Tigers. The Philippines was very much part of that catching up. In the decade or so up to 1913, Philippine industrial output grew at 6.3 percent per annum, way above that achieved by the industrial leaders. Indeed, the Philippines was the third Asian country to enter the 5% industrial growth club: Japan 1899, China 1900, the Philippines 1913, Taiwan 1914, Korea 1921, and India 1929. The Philippines continued its industrial catch up during the interwar years 1920-1938, as it did during the ISI years 1950-1972. While the Philippines conformed to the world-wide unconditional industrial convergence pattern for seven decades, it began to deviate from the pack in the 1980s, leaving the industrial catching up club in 1982, never to re-enter. What were the causes of this regime switch? Was it political instability at a critical time in the 1980s? Was it a subsequent failure to exploit the move of Japanese manufacturing FDI into the region? Was it an institutional weakness benign in the pre-1982 past but made more powerful since? Was it some liberal policy package that penalized manufacturing when it was already on the ropes? Was it a labor emigration surge in the 1980s that stripped the work force of industrial skills? Was it some massive Dutch Disease created by subsequent huge emigrant remittances? Given the initial political shock, all of these negative forces had their influence in the form of a ‘perfect de-industrializing storm’. Length: 33 pages Creation-Date: 2013-04 Publication-Status: Published as UPSE Discussion Paper No. 2013-03, April 2013 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/707 File-Format: Application/pdf Number: 201303 Classification-JEL: F1, N7, O2 Keywords: industrial development, growth, Philippines Handle: RePEc:phs:dpaper:201303 Template-Type: ReDIF-Paper 1.0 Author-Name: Joseph J. Capuno Author-Name-First: Joseph J. Author-Name-Last: Capuno Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Fiscal transfers and gerrymandering under decentralization in the Philippines Abstract: While gerrymandering in developing countries is often pushed by local authorities to secure political advantages, fiscal grants systems under decentralization may also have result in the same. We investigate this issue to identify the correlates of the growth in the number of cities in the Philippines in 2001-2010. Using a panel of municipal-level data, incremental fiscal transfers are found to drive cityhood. Also, political payoffs -- like the incumbent mayor's re-election or having another member of the same political clan elected to the same position -- motivate the creation of new cities. Reforms in the country's fiscal transfer program are suggested. Length: 38 pages Creation-Date: 2013-06 Publication-Status: Published as UPSE Discussion Paper No. 2013-04, June 2013 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/708 File-Format: Application/pdf Number: 201304 Classification-JEL: H11, H73, H77 Keywords: Gerrymandering, fiscal grants, decentralization Handle: RePEc:phs:dpaper:201304 Template-Type: ReDIF-Paper 1.0 Author-Name: S. Quimbo Author-Name-First: S. Author-Name-Last: Quimbo Author-Name: X. Javier Author-Name-First: X. Author-Name-Last: Javier Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Does economic empowerment protect women against domestic violence? Evidence from the Philippines Abstract: Using data from the 2008 National Demographic and Health Survey, we ask whether women's economic empowerment -defined alternatively as having the ability to decide on (i) daily needs, (ii) major purchases, and (iii) spending own income - protects women against domestic violence. Using a simple model of choice of conflict resolution technology among spouses, we find evidence that economic empowerment protects women in a non-linear way. Low and high levels of empowerment reduce the likelihood of women experiencing domestic violence, possibly reflecting traditional gender roles in Philippine society. Length: 16 pages Creation-Date: 2013-06 Publication-Status: Published as UPSE Discussion Paper No. 2013-05, July 2013 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/709/181 File-Format: Application/pdf Number: 201305 Classification-JEL: J12, J16 Keywords: Economic empowerment; domestic violence; Philippines Handle: RePEc:phs:dpaper:201305 Template-Type: ReDIF-Paper 1.0 Author-Name: Fidelina B. Natividad-Carlos Author-Name-First: Fidelina Author-Name-Last: Natividad-Carlos Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: An Exercise on Discrete-Time Intertemporal Optimization Abstract: This paper, using the different alternative methods of dynamic optimization - the Lagrange/Kuhn-Tucker (LKT) method, the substitution method, the Hamiltonian method, and the dynamic programming approach - derives the conditions that must be satisfied by the solution to the so-called Ramsey problem, hopefully in a way that can be understood by advanced undergraduate economics students. This is done by assuming that time is discrete and that, for simplicity but without loss of generality, there are only three periods. Length: 31 pages Creation-Date: 2013-07 Publication-Status: Published as UPSE Discussion Paper No. 2013-06, July 2013 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/710/184 File-Format: Application/pdf Number: 201306 Classification-JEL: C61, D91, E21 Keywords: Ramsey problem, dynamic optimazation, Lagrange method, Substitution method, Hamiltonian method, dynamic programming Handle: RePEc:phs:dpaper:201306 Template-Type: ReDIF-Paper 1.0 Author-Name: Fidelina B. Natividad-Carlos Author-Name-First: Fidelina Author-Name-Last: Natividad-Carlos Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: ‘Time Inconsistency’: The Phillips Curve Example (An Analysis for Intermediate Macroeconomics) Abstract: This paper provides the algebra and a panel diagram to attempt to examine the so-called inflation- unemployment (or Phillips curve, or aggregate supply) example, the most popular example in the literature when introducing the concept of “time inconsistency” or “dynamic inconsistency”. The resulting panel diagram (along with the derivations presented in the appendices) is used to analyze the different possible outcomes, depending on the scenarios – rule or pre-commitment, cheating, and equilibrium – and find out whether there is indeed “time inconsistency” or “dynamic inconsistency” in the said example. Length: 40 pages Creation-Date: 2013-07 Publication-Status: Published as UPSE Discussion Paper No. 2013-07, July 2013 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/711/183 File-Format: Application/pdf Number: 201307 Classification-JEL: E31, E52, E61 Keywords: Philips curve, aggregate supply, time inconsistency, dynamic inconsistency, short-run optimal policy, long-run optimal policy, rational expectations, rules vs discretion Handle: RePEc:phs:dpaper:201307 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 Title: Moral Hazard and Cooperation in Competing Teams Abstract: We give the conditions for the attainment of self-enforcing Pareto efficiency under complete effort non-observability, strict agent rationality and global budget balance among teams involved in a winner-takes-all contest for a prize. Employing Nash conjectures and fixed fee financing of the prize, we characterize the competitive environment that allows teams to overcome the moral hazard problem and induce self-enforcing egalitarian outcomes. If the number of identical teams is finite, the production technology is restricted to factor symmetric ones. When the number of identical teams becomes unbounded, the restriction on the production technology vanishes and there always exists a fee level that supports a self-enforcing Pareto efficient solution as long as member utilities over own share are identical and obey the Inada conditions. Some form of membership symmetry cannot be ruled out for Pareto efficiency. Length: 27 pages Creation-Date: 2013-07 Publication-Status: Published as UPSE Discussion Paper No. 2013-08, July 2013 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/712/185 File-Format: Application/pdf Number: 201308 Classification-JEL: 511, 514, 611 Handle: RePEc:phs:dpaper:201308 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 Title: Salience and Cooperation Among Rational Egoists Abstract: We give the conditions for the attainment of self-enforcing Pareto efficiency under complete effort non-observability, strict agent rationality and global budget balance among teams involved in a winner-takes-all contest for a prize. Employing Nash conjectures and fixed fee financing of the prize, we characterize the competitive environment that allows teams to overcome the moral hazard problem and induce self-enforcing egalitarian outcomes. If the number of identical teams is finite, the production technology is restricted to factor symmetric ones. When the number of identical teams becomes unbounded, the restriction on the production technology vanishes and there always exists a fee level that supports a self-enforcing Pareto efficient solution as long as member utilities over own share are identical and obey the Inada conditions. Some form of membership symmetry cannot be ruled out for Pareto efficiency. Length: 9 pages Creation-Date: 2013-07 Publication-Status: Published as UPSE Discussion Paper No. 2013-09, July 2013 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/712/185 File-Format: Application/pdf Number: 201309 Classification-JEL: C72, D01, D02 Keywords: social dilemma, rational egoist, cooperation, Ostrom threshold Handle: RePEc:phs:dpaper:201309 Template-Type: ReDIF-Paper 1.0 Author-Name: Charles Yuji Horioka Author-Name-First: Charles Yuji Author-Name-Last: Horioka Author-Workplace-Name: School of Economics, University of the Philippines; National Bureau of Economic Research; and Institute of Social and Economic Research, Osaka University Author-Name: Takaaki Nomoto Author-Name-First: Takaaki Author-Name-Last: Nomoto Author-Workplace-Name: Office of Regional and Economic Integration, Asian Development Bank Author-Name: Akiko Terada-Hagiwara Author-Name-First: Akiko Author-Name-Last: Terada-Hagiwara Author-Workplace-Name: Economic and Research Department, Asian Development Bank Title: Why has Japan’s Massive Government Debt Not Wreaked Havoc (Yet)? Abstract: In this paper, we present data on trends over time in government debt financing in Japan since 2010 with emphasis on the importance of foreign holders and speculate about the determinants of those trends. We find that Japanese government securities were held primarily by domestic holders until recently because robust domestic saving (combined with strong home bias) made it possible for domestic investors to absorb most of the government debt but that foreign holdings of Japanese government securities have increased sharply in recent years, especially in the case of short-term government securities. We show that trends in foreign holdings of Japanese government securities can be explained by conventional economic factors such returns and risks and that the recent surge in foreign holdings of short-term Japanese government securities is attributable to foreign investors in search of a safe haven for their funds in the face of the Global Financial Crisis of 2008-09 precipitated by the Lehman crisis. Our analysis suggests that the surge in foreign holdings of Japanese government securities will subside (in fact, it already has), and this, combined with the projected decline in domestic saving (especially household saving) caused by population aging, will make it necessary for Japan to get its fiscal house in order. Thus, Japan’s massive government debt has not wreaked havoc in the past because of robust domestic saving and a temporary inflow of foreign capital caused by the Global Financial Crisis, but it may wreak havoc in the future as both of these factors become less applicable unless the government debt can be brought under control. Length: 27 pages Creation-Date: 2013-10 Publication-Status: Published as UPSE Discussion Paper No. 2013-10, October 2013 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/714/187 File-Format: Application/pdf Number: 201310 Classification-JEL: E21, F32, F34, G15, H63, O53 Keywords: Government debt, government securities, government bonds, government bills, government notes, sovereign debt, debt securities, debt financing, government debt financing, debt holdings, government debt holdings, foreign debt, foreign debt holdings, foreign debt investments, foreign investors, capital flows, international capital flows, short-term capital movements, cross-border portfolio investments, safe haven, capital flight, flight to safety, debt rollover, home bias, sovereign debt crisis, eurozone crisis, eurozone, Japan Handle: RePEc:phs:dpaper:201310 Template-Type: ReDIF-Paper 1.0 Author-Name: Charles Yuji Horioka Author-Name-First: Charles Yuji Author-Name-Last: Horioka Author-Workplace-Name: School of Economics, University of the Philippines; National Bureau of Economic Research; and Institute of Social and Economic Research, Osaka University Author-Name: Akiko Terada-Hagiwara Author-Name-First: Akiko Author-Name-Last: Terada-Hagiwara Author-Workplace-Name: Economic and Research Department, Asian Development Bank Title: Corporate Cash Holding in Asia Abstract: In this paper, we analyze the determinants of corporate saving in the form of changes in the stock of cash for 11 Asian economies using firm-level data from the Oriana Database for the 2002–2011 period. We find some evidence that cash flow has a positive impact on the change in the stock of cash, which suggests that Asian firms are borrowing constrained and that they save more when their cash flow increases so that they will be able to finance future investments. Moreover, we find in the developed economy sample that, as expected, cash flow has a positive impact on the change in the stock of cash only in the case of the smallest firms, which are more likely to be borrowing constrained, and find in the developing economy sample that, as expected, the positive impact of cash flow on the change in the stock of cash declines with firm size. In addition, we find that the cash flow sensitivity of cash declined after the global financial crisis. Finally, we find some evidence that Tobin’s q has a positive impact on the change in the stock of cash. Length: 46 pages Creation-Date: 2013-10 Publication-Status: Published as UPSE Discussion Paper No. 2013-11, October 2013 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/715/188 File-Format: Application/pdf Number: 201311 Classification-JEL: D92, E21, E22, G11, O53 Keywords: corporate saving, corporate investment, borrowing constraints, liquidity constraints, cash flow, cash holdings, cash flow sensitivity of cash, Tobin’s q, firm size, productivity shocks, Asia, Oriana Database, financial sector development, global financial crisis Handle: RePEc:phs:dpaper:201311 Template-Type: ReDIF-Paper 1.0 Author-Name: Joseph J. Capuno Author-Name-First: Joseph Author-Name-Last: Capuno Author-Workplace-Name: School of Economics, University of the Philippines Author-Name: Aleli D. Kraft Author-Name-First: Aleli Author-Name-Last: Kraft Author-Workplace-Name: School of Economics, University of the Philippines Author-Name: Stella A. Quimbo Author-Name-First: Stella Author-Name-Last: Quimbo Author-Workplace-Name: School of Economics, University of the Philippines Author-Name: Carlos Antonio R. Tan, Jr. Author-Name-First: Carlos Antonio, Jr. Author-Name-Last: Tan Author-Workplace-Name: School of Economics, University of the Philippines Title: Shocks to Philippine households: Incidence, idiosyncrasy and impact Abstract: With their country located in the Pacific Ring of Fire and in the monsoon belt, Philippine households are perennially exposed to natural disasters and calamities. In addition, they face health, economic and sociopolitical risks. Using a nationally representative sample of households, we assess the overall incidence of different shocks, the extent to which they simultaneously affect households in the same area, and their impact. A huge majority of households experience shocks, with the incidence of different shocks being roughly the same for poor and rich households. Natural and economic shocks appear to affect more households simultaneously in the same area than sociopolitical shocks, health shocks and deaths. Health shocks and deaths lead to greater short-term and long-term impacts. Richer households are able to recover better than the poor. We draw some implications for the design and targeting of social health insurance, disaster management and other social protection programs. Length: 35 pages Creation-Date: 2013-11 Publication-Status: Published as UPSE Discussion Paper No. 2013-12, November 2013 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/737 File-Format: Application/pdf Number: 201312 Classification-JEL: D10, I38 Keywords: Household shocks; coping mechanisms; welfare Handle: RePEc:phs:dpaper:201312