Template-Type: ReDIF-Paper 1.0 Author-Name: Agustin L. Arcenas Author-Name-First: Agustin Author-Name-Last: Arcenas Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Climate Change, Dengue and the Economy: Ascertaining the Link Between Dengue and Climatic Conditions Abstract: This paper examines the climate-change related factors that affect the incidence of dengue in the Philippines. Dengue, one of the most high-profile public health problems in Southeast Asia, has been estimated to cost hundreds of millions of dollars in the Philippines and worldwide in terms of treatment, surveillance and control, lost income and other indirect costs per year. The disease has been a burden on the public, especially the poor who are less able to access funds for treatment and more heavily affected by the loss in income due to illness. The findings indicate that temperature, precipitation and the incidence of La Niña significantly contribute to the cases of dengue in the Philippines by enhancing the breeding, growth and development of the Aedis aegypti, the dengue-carrying mosquito variety. The econometric results also indicate that better household sanitation practices also reduce dengue cases, indicating that investments to enhance the public’s adoption of hygienic and other health practices do lessen the transmission of diseases such as dengue. The results of the study are consistent with the findings of studies regarding dengue in other parts of the world, and contribute to the growing awareness about the health impacts of climate change. This study should provide Philippine policy-makers some guidance in addressing the dengue problem as regional climate change becomes more pronounced. Length: 25 pages Creation-Date: 2016-03 Publication-Status: Published as UPSE Discussion Paper No. 2016-01, March 2016 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/1488 File-Format: Application/pdf Number: 201601 Classification-JEL: Q54, I18 Keywords: Dengue, climate change La Niña Handle: RePEc:phs:dpaper:201601 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 Author-Name: Janine Elora M. Lazatin Author-Name-First: Janine Elora Author-Name-Last: Lazatin Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Do Regions Gain from an Open Economy? Abstract: This paper looks into whether and how sub-national regions can benefit from a country’s economic openness. Using data on the Philippines, it first notes marked disparities across its regions as reflected in economic and social indicators. The dominance of Metropolitan Manila in the national economic landscape persists, albeit spread effects into adjacent regions are increasingly apparent. Applying econometric analysis to panel data, the paper then examines how regional economic growth is influenced by economic openness. Results show that regional gains appear to be uneven with the ex-ante lagging regions at a disadvantage; by extension, the welfare effect on the poor appears unequal, as well. Length: 26 pages Creation-Date: 2016-02 Publication-Status: Published as UPSE Discussion Paper No. 2016-02, March 2016 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/1489 File-Format: Application/pdf Number: 201602 Classification-JEL: I32, O18, R11 Keywords: economic openness, regional development; poverty, Philippines, Asia Handle: RePEc:phs:dpaper:201602 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-Workplace-Name: National Academy of Science and Technology Title: Behavioral Polymorphism in Bayesian Games Abstract: J. Harsanyi introduced structural polymorphism in game theory, that is, there are many possible agent types such as "low productivity or high productivity" with corresponding probability but all operating under one behavioral type, strict rationality. In this paper, we introduce behavioral polymorphism into Bayesian games. The multiplicity of behavioral types have become increasingly recognized and studied. Agents ascribe to each other a probability distribution across the possible types. They then choose the appropriate type as response to the possible type of the others which type determines the choice of strategy. We show in a dimorphic game model with the two types being strict rationality (SR) and utilitarian altruist (UA) that there always is a high enough assignment such that cooperation is the dominant strategy for both players in initially social dilemma games. Thus, the strategy set is endogenous in games with behavioral polymorphism. We argue that the assignment is based on some heuristics such as the counter-parties’ membership in some groups. Length: 9 pages Creation-Date: 2016-05 Publication-Status: Published as UPSE Discussion Paper No. 2016-03, May 2016 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/1490 File-Format: Application/pdf Number: 201603 Classification-JEL: C70, C72 Keywords: behavioral polymorphism; Bayesian games; cooperation; dominant strategy Handle: RePEc:phs:dpaper:201603 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-Workplace-Name: National Academy of Science and Technology Title: Groups, Norms and Endogenous Membership: Towards a Socially Inclusive Economics Abstract: In Part I, we argue that Economics must outgrow the narrow confines of Neo-Classical Economics to embrace ‘sociality’ first championed by Herbert Simon in the mid-1950s and now by a growing number of economists under the banner of Social Economics. We contend here that Neo-Classical Economics is incomplete, rather than wrong. Firstly any alternative model must subsume the Neo-Classical model as a special case even as it embraces conceptual promontories from other social science disciplines, viz., groups, norms and sanctions. Secondly, it must be couched in a language familiar to the economics profession? maintain optimizing behavior and equilibrium analysis. In Part II, we construct a formal model where the agent is at once a private entity and a member of a social group; his utility is inclusive combining the agent’s private utility over goods (the Neo-Classical utility) and the utility the he derives from being a member, viz., access to group’s collective good. As a member, he commits to support the procurement of the group’s collective good and submits to a system of norms and to the corresponding self-organized sanctions regime punishing violation of group norms. The agent solves a sequence of optimization problems: the first determines his optimal consumption basket given his budget constraint (net of group contribution), prices in the market location of the group; this gives his inclusive indirect utility; the second determines his optimal market hours by maximizing his indirect inclusive utility subject to time constraint and the market wage rate; this gives his doubly indirect inclusive utility; thirdly, he maximizes his inclusive doubly indirect utility with respect to the monetary contribution of the group given the sanctions for norm violation. The choice of social group follows from a rank order of groups by greatest inclusive utility an agent can attain in each competing social group. Finally, we show how the agent’s relative weighting of his private and group commitment may wax and wane depending upon the stakes of the inter-group competition. Length: 13 pages Creation-Date: 2016-05 Publication-Status: Published as UPSE Discussion Paper No. 2016-04, May 2016 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/1491 File-Format: Application/pdf Number: 201604 Classification-JEL: D01, D11 Keywords: Sociality, groups, norms, choice of groups, compliance with norms, inter-group competition Handle: RePEc:phs:dpaper:201604 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-Workplace-Name: National Academy of Science and Technology Title: Conglopolistic Competition in Small Emerging Economies: When Large and Diversified is Beautiful Abstract: The economic catch-up of the East Asian miracle economies went hand-in-hand with the emergence and even dominance of large private or quasi-state business groups such as the Zaibatsus in the pre-WWII and the Keiretsus of the post-WWII Japan, the Chaebols of South Korea and the Taipan-led business empires of South and South East Asia. The dominance of the so-called Robber Barons in the Gilded Age of the USA catch-up era (1870-1900) was of the same genre. The natural vent for size among firms, following the Williamson make or buy logic, manifests itself as vertical integration in large economies; in small economies, it manifests itself as horizontal integration or conglomeracy. The motivations are underdeveloped factor mainly capital and insurance markets. Weak public ordering also motivates size as firms to vertically integrate into private ordering to resist official and unofficial predation. Conglopolistic competition, the competition among conglomerates in many markets, is largely in the non-traded goods sectors where foreign competition is not felt and market saturation is quickly attained. We give show how conglopolistic competition is welfare-improving and give examples of how it boosts the collective action capacity of the weak Philippine state. The dynamism of the Philippine Service sector is due to lively conglopolistic competition which in turn comes from relatively free entry (apart from large capital cost) in these sectors. It is imperative to attract conglopolistic competition in the traded goods sector especially in industrial agriculture. We identify fragmentation of farm land and the 5-hectare ownership ceiling as the one barrier preventing the entry of conglopolistic competition in agriculture. Length: 12 pages Creation-Date: 2016-06 Publication-Status: Published as UPSE Discussion Paper No. 2016-05, June 2016 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/1492 File-Format: Application/pdf Number: 201605 Classification-JEL: L22, L25 Keywords: Conglomerates, horizontal integration, small emerging markets, conglopolism, non-traded goods sector Handle: RePEc:phs:dpaper:201605 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-Workplace-Name: National Academy of Science and Technology Title: Why Fixed Rent Contracts are Less Prevalent: Weak Third Party Enforcement and Endogenous Principal Type Abstract: We revisit the question of why fixed rent contracts are less prevalent than crop share contracts despite Marshallian inefficiency. We consider the case where the type of the principal is endogenous to contract provisions and reneging by the principal may pay due to weak third party enforcement (TPE). We imbed the quality of TPE into the participation constraint of the agent in an effort-in-advance P-A model. The governance regime explicitly involves interplay of three categories of the Northian enforcement, viz., first, second and third party enforcement. Weak and strong TPE are formally defined. We show that the general contract derived nests the usual textbook contract when TPE is strong; weak TPE on the other hand results in a strictly positive induced risk aversion which always exceeds the inherent risk aversion of the agent. This prevents the power of the contract to equal one even when the agent is risk-neutral, thus, rendering a fixed-rent contract sub-optimal. Length: 26 pages Creation-Date: 2016-08 Publication-Status: Published as UPSE Discussion Paper No. 2016-06, August 2016 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/1493 File-Format: Application/pdf Number: 201606 Classification-JEL: D23, D82, D86 Keywords: sharecropping, weak TPE, endogenous type, induced risk aversion Handle: RePEc:phs:dpaper:201606 Template-Type: ReDIF-Paper 1.0 Author-Name: Romeo Matthew Balanquit Author-Name-First: Romeo Matthew Author-Name-Last: Balanquit Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Threshold Bank-run Equilibrium in Dynamic Games Abstract: This study sets a bank-run equilibrium analysis in a dynamic and incomplete information environment where agents can reconsider attempts to run on the bank over time. The typical static bank-run model is extended in this paper to capture the learning dynamics of agents through time, giving bank-run analysis a more realistic feature. Apart from employing a self-fullling framework in this model, where agents' actions are strategic complements, we allow agents to update over time their beliefs on the strength of the fundamentals that is not commonly known. In particular, we extend the bank-run model analyzed by Goldstein and Pauzner (Journal of Finance 2005) and build it on a dynamic global games framework studied by Angeletos et.al. (Econometrica 2007). We present here how a simple recursive setup can generate a unique monotone perfect Bayesian Nash equilibrium and show how the probability of bank-run is a¤ected through time by the inow of information and the knowledge of previous state outcome. Finally, it is also shown that when an unobservable shock is introduced, multiplicity of equilibria can result in this dynamic learning process. Length: 28 pages Creation-Date: 2016-08 Publication-Status: Published as UPSE Discussion Paper No. 2016-07, August 2016 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/1494 File-Format: Application/pdf Number: 201607 Classification-JEL: C73, D82, G10 Keywords: threshold bank-run, monotone perfect Bayesian Nash equilibrium, dynamic global games Handle: RePEc:phs:dpaper:201607 Template-Type: ReDIF-Paper 1.0 Author-Name: Romeo Matthew Balanquit Author-Name-First: Romeo Matthew Author-Name-Last: Balanquit Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Common Belief Revisited Abstract: This study presents how selection of equilibrium in a game with many equilibria can be made possible when the common knowledge assumption (CKA) is replaced by the notion of common belief. Essentially, this idea of pinning down an equilibrium by weakening the CKA is the central feature of the global game approach which introduces a natural perturbation on games with complete information. We argue that since common belief is another form of departure from the CKA, it can also obtain the results attained by the global game framework in terms of selecting an equilibrium. We provide here necessary and sufficient conditions. Following the program of weakening the CKA, we weaken the notion of common belief further to provide a less stringent and a more natural way of believing an event. We call this belief process as iterated quasi-common p-belief which is a generalization to many players of a two-person iterated p-belief. It is shown that this converges with the standard notion of common p-belief at a sufficiently large number of players. Moreover, the agreeing to disagree result in the case of beliefs (Monderer & Samet, 1989 and Neeman, 1996a) can also be given a generalized form, parameterized by the number of players. Length: 24 pages Creation-Date: 2016-08 Publication-Status: Published as UPSE Discussion Paper No. 2016-08, August 2016 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/1495 File-Format: Application/pdf Number: 201608 Classification-JEL: D83, C70 Keywords: common p-belief; common knowledge assumption; global games Handle: RePEc:phs:dpaper:201608 Template-Type: ReDIF-Paper 1.0 Author-Name: Romeo Matthew Balanquit Author-Name-First: Romeo Matthew Author-Name-Last: Balanquit Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: MJM Kimwell Author-Name-First: MJM Author-Name-Last: Kimwell Title: Procurement Auctions with Interdependent Values and Affiliated Signals Abstract: Procurement auctions that assume independent private values (IPV) provide a benchmark for analysis that is readily demonstrated but often unrealistic. Firms who compete for exclusive selling rights normally derive outputs from a highly similar set of inputs which, in turn, allows them to obtain some knowledge on how others would price their goods. In this paper, we incorporate this assumption by showing how affiliated signals and interdependent values can possibly affect the expected quantities sold and selling prices of some endogenous-quantity procurement auction formats. The resulting equilibrium bidding strategies no longer give credence to the typical equivalence result which holds under IPV. In this environment, the second-price auction yields both higher expected prices and lower expected quantities than the first-price auction. This result is consistent with similar studies showing suboptimality of auction mechanisms that allow for winning bids of less-than-the-highest willingness to pay, when values are not fully independent. Length: 14 pages Creation-Date: 2016-09 Publication-Status: Published as UPSE Discussion Paper No. 2016-09, September 2016 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/1496 File-Format: Application/pdf Number: 201609 Classification-JEL: D44, H57 Keywords: procurement auctions; affiliated signals; interdependent values; first price vs. second price Handle: RePEc:phs:dpaper:201609 Template-Type: ReDIF-Paper 1.0 Author-Name: Renato E. Reside, Jr. Author-Name-First: Renato Author-Name-Last: Reside Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Lee Burns Author-Name-First: Lee Author-Name-Last: Burns Author-Workplace-Name: University of Sydney, Australia Title: Comprehensive Tax Reform in the Philippines: Principles, History and Recommendations Abstract: The new Duterte administration is planning to undertake a reform of the country’s tax system. This paper provides a background to options available to the government moving forward, starting with basic principles of taxation, criteria for evaluation, tax instruments and mix of instruments. The background is complemented by a review of the history of past tax reforms in the Philippines, from the end of the Marcos regime to the Aquino administration. The historical and episodic assessment ends with a list of lessons learned from the past. Finally, recommendations are made for both tax policy and tax administration. Length: 38 pages Creation-Date: 2016-09 Publication-Status: Published as UPSE Discussion Paper No. 2016-10, September 2016 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/1497 File-Format: Application/pdf Number: 201610 Classification-JEL: H2, O23 Keywords: tax reform; taxation; Philippines Handle: RePEc:phs:dpaper:201610 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 Diliman Author-Name: Carlos Antonio R. Tan, Jr. Author-Name-First: Carlos Antonio Author-Name-Last: Tan Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Xylee Javier Author-Name-First: Xylee Author-Name-Last: Javier Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: WASH for child health: Some evidence in support of public intervention in the Philippines Abstract: Like in many developing countries, diarrheal diseases remain a top cause of child mortality and morbidity in the Philippines. Partly to address this problem, the government has undertaken programs to expand access to safe water and sanitation facilities, especially among poor households. To assess the impact of such interventions on child health, we apply propensity score matching technique on the pooled data from the last five rounds of the National Demographic and Health Survey. We find that improved water and improved sanitation each reduced the probability of child diarrhea in 1993-2008 by around two percentage points. In 2013, improved water reduced the probability by about 7 percentage points, while improved sanitation do not seem to have statistically significant effect. These results lend support to the government’s programs to widen access to safe water and sanitation facilities as measures to improve child health. Length: 41 pages Creation-Date: 2016-09 Publication-Status: Published as UPSE Discussion Paper No. 2016-11, September 2016 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/1498 File-Format: Application/pdf Number: 201611 Classification-JEL: I12, I18, O53 Keywords: Water and sanitation; child health; Philippines Handle: RePEc:phs:dpaper:201611 Template-Type: ReDIF-Paper 1.0 Author-Name: Toby C. Monsod Author-Name-First: Toby Author-Name-Last: Monsod Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Government "underspending" in perspective: Incompetence, inertia, or indigestion? Abstract: The measured underspending over the last 5 years has more to do with ambitious targets rather than apathetic or incompetent bureaucrats: while actual disbursements fell short of planned disbursements by about ten percent per year from 2011 to 2015, real per capita disbursements on capital outlays and maintenance and operating expenses increased relative to levels in 1999 to 2010 by an average of 41.6 and 76.8 percent respectively. The bureaucracy was unable to keep up with its own ambitions because of absorptive capacity constraints which were driven in part by the inertia from three decades of maneuvering in tight fiscal space as well as coordination problems and other structural bottlenecks, some of which have long-attended budget and plan design and execution but have not been recognized as binding constraints until now. The fund absorption problem is not uniform across agencies however indicating more fundamental organizational issues in certain sectors, and the need for actions beyond public finance management reforms to optimize the contribution of fiscal spending to inclusive growth. Length: 27 pages Creation-Date: 2016-12 Publication-Status: Published as UPSE Discussion Paper No. 2016-12, December 2016 File-URL: http://www.econ.upd.edu.ph/dp/index.php/dp/article/view/1499 File-Format: Application/pdf Number: 201612 Classification-JEL: Keywords: Handle: RePEc:phs:dpaper:201612