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 Author-Name: Aleli D. Kraft Author-Name-First: Aleli Author-Name-Last: Kraft Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Cielo Magno Author-Name-First: Cielo Author-Name-Last: Magno Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Jan Carlo Punongbayan Author-Name-First: Jan Carlo Author-Name-Last: Punongbayan Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Orville Jose C. Solon Author-Name-First: Orville Jose Author-Name-Last: Solon Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Elizabeth Tan Author-Name-First: Elizabeth Author-Name-Last: Tan Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Agustin L. Arcenas Author-Name-First: Agustin Author-Name-Last: Arcenas Author-Workplace-Name: College of Public Affairs and Development, University of the Philippines Los Baños Author-Name: Florian Alburo Author-Name-First: Florian Author-Name-Last: Alburo 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: How to change a constitution by hand-waving (Or, the unbearable lightness of evidence in support of lifting foreign ownership restrictions) Abstract: This paper provides a review of the empirical evidence cited in the current public discussions on removing the remaining constitutional restrictions on foreign-equity ownership in certain economic sectors. A fuller appreciation of the given evidence shows that lifting equity restrictions is not a necessary condition for explaining the inward stocks of foreign direct investment (FDI) in the cited countries, including the Philippines. While restrictive equity rules may represent a hindrance to FDI, their potential effects are small and sometimes insignificant in comparison to other explanatory variables such as the ease of doing business, physical infrastructure, and perceived corruption. The paper cautions against an uncritical mindset towards FDI, discussing how consistent empirical evidence of the positive effects of FDI on host economies has proved elusive and that knowledge and technological spillovers from FDI are highly context-specific, not unconditional, and not without cost. Instead, a more discriminating approach, focusing on the quality of multinational enterprises and its activities, rather than simply on the volume of FDI, is recommended. Finally, the paper warns that the push for legislative flexibility, while attractive on the surface, can be self-defeating since it also has the potential of increasing investment uncertainty, particularly given the idiosyncrasies of Philippine political economy. Length: 42 pages Creation-Date: 2024-04 Publication-Status: Published as UPSE Discussion Paper No. 2024-01, April 2024 File-URL: https://econ.upd.edu.ph/dp/index.php/dp/article/view/1552 File-Format: Application/pdf Number: 202401 Classification-JEL: F14, F21, F23, F60 Keywords: foreign direct investment; multinational enterprises; foreign equity restrictions, constitutional change, empirical models of investment distribution; influences on the distribution of direct foreign investments; rules versus discretion Handle: RePEc:phs:dpaper:202401 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 Author-Name: Aleli D. Kraft Author-Name-First: Aleli Author-Name-Last: Kraft Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Cielo Magno Author-Name-First: Cielo Author-Name-Last: Magno Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Jan Carlo Punongbayan Author-Name-First: Jan Carlo Author-Name-Last: Punongbayan Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Orville Jose C. Solon Author-Name-First: Orville Jose Author-Name-Last: Solon Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Elizabeth Tan Author-Name-First: Elizabeth Author-Name-Last: Tan Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Agustin L. Arcenas Author-Name-First: Agustin Author-Name-Last: Arcenas Author-Workplace-Name: College of Public Affairs and Development, University of the Philippines Los Baños Author-Name: Florian Alburo Author-Name-First: Florian Author-Name-Last: Alburo 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: [Rejoinder]: How to change a constitution by hand-waving (Or, the unbearable lightness of evidence in support of lifting foreign ownership restrictions) Abstract: We are pleased to note that the discussion paper we wrote (“How to change a constitution by handwaving”*) has attracted some interest from the public and observers of economic policy. Among the more thoughtful responses the paper has received is that from the Foundation for Economic Freedom (FEF). Indeed, their response concedes the main point of our paper, which is that compared with lifting foreign-equity restrictions: “Corruption and infrastructure gaps may well be more significant turnoffs for foreign investors.” Notwithstanding this, the FEF response incongruously then insists that “removing the restrictions is a necessary condition”. To insist on their conclusion, the FEF challenges our interpretation of the quantitative evidence as well as presents illustrative anecdotes or events meant to repair what they perceive as our paper’s being “ahistorical and devoid of historical context”. Here, we set the record straight on both FEF’s appreciation of the econometric evidence and on the anecdotes they recount. Length: 7 pages Creation-Date: 2024-04 Publication-Status: Published as UPSE Discussion Paper No. 2024-01b, April 2024 File-URL: https://econ.upd.edu.ph/dp/index.php/dp/article/view/1553 File-Format: Application/pdf Number: 202401b Classification-JEL: F14, F21, F23, F60 Keywords: foreign direct investment; multinational enterprises; foreign equity restrictions, constitutional change, empirical models of investment distribution; influences on the distribution of direct foreign investments; rules versus discretion Handle: RePEc:phs:dpaper:202401b Template-Type: ReDIF-Paper 1.0 Author-Name: Maria Francesca Mercedes D. Grabador Author-Name-First: Maria Francesca Mercedes Author-Name-Last: Grabador Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Water Rights Pricing in the Philippines: Issues, Challenges and Way Forward Abstract: Water is critical not only to economic progress and sustainable development but most importantly, to human survival. Yet, the way water is valued suggests an inexhaustible supply, when the opposite is true. This paper examines if water rights in the Philippines are underpriced and looks at how these can be valued at full economic cost. It finds that water resources in the Philippines are essentially given no value since the administrative cost-recovery approach is used to determine fees for water permits and water charges. Moreover, through the analysis of different pricing models used in other countries’ water markets, this study also presents the core components of an economic pricing model for water rights. While the establishment of water markets may represent the first best solution to water scarcity, it is an ideal solution in an ideal setting; thus, second and third best solutions are also presented. The study concludes that while it is not possible to immediately price water rights at its full economic cost, it may be done gradually, starting with the adoption of volumetric pricing and strengthening the institutional capacity of the National Water Resources Board (NWRB). Length: 32 pages Creation-Date: 2024-07 Publication-Status: Published as UPSE Discussion Paper No. 2024-02, July 2024 File-URL: https://econ.upd.edu.ph/dp/index.php/dp/article/view/1555 File-Format: Application/pdf Number: 202402 Classification-JEL: Q21, Q25, Q28, O53, O57 Keywords: water permits, water rights, water rights trading, water rights markets, economic pricing models forwater rights, water resource management, volumetric pricing Handle: RePEc:phs:dpaper:202402 Template-Type: ReDIF-Paper 1.0 Author-Name: Florian Alburo Author-Name-First: Florian Author-Name-Last: Alburo Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: OFW: Migration and Development Abstract: This paper attempts to review the Overseas Filipino Worker (OFFW) phenomenon through selected aspects of it --- past and present trends, structural issues, and development context. While the OFW system appears to be beneficial to the county, it is overrated. It is unclear what policies were really set in place to eventually phase it out. While it alleviates poverty, whether poverty reduction is permanent is also unclear. Structurally, the OFW profile shows a “cream of the crop” relative to the labor force and tend to deploy more females creating problems with those left behind. The development context compares the experience of the Philippines with other countries which were able to turnaround from being net sources of migrant workers to net absorbers. Three development policies are explored to partly explain the divergence between migrant worker movement in the Philippines and others. Length: 27 pages Creation-Date: 2024-08 Publication-Status: Published as UPSE Discussion Paper No. 2024-03, August 2024 File-URL: https://econ.upd.edu.ph/dp/index.php/dp/article/view/1556 File-Format: Application/pdf Number: 202403 Classification-JEL: F1, F2, J3, J6, O4 Keywords: Overseas Filipino Worker, OFW, Migration and Development Handle: RePEc:phs:dpaper:202403 Template-Type: ReDIF-Paper 1.0 Author-Name: JC Punongbayan Author-Name-First: JC Author-Name-Last: Punongbayan Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Decomposing Philippine inflation into its supply and demand components (2001-2023) Abstract: Does identification with dominant ethnic groups lead individuals to diverge in their preferences for redistribution? This paper contributes to the comparative analysis of the role of ethnic background in shaping attitudes towards government's role in reducing income inequalities in Indonesia, Malaysia, Philippines, Singapore and Thailand, where nearly half-a­billion people live and belong to more than sixty ethnic groups. Using a pool of nationally­ representative survey data from the five Southeast Asian countries, we first classified the respondents by population dominance of the ethnic groups they claim to belong, and then examine for differences across members of dominant ethnic groups in their preferences for government redistribution. Relative to the biggest ethnic group, the second biggest ethnic group is found to have less preference for redistribution, after controlling for other factors. No systematic differences in their redistributive preferences are found, however, between the biggest ethnic group and other smaller groups. The results are fairly robust even after accounting for the possible moderating effects of income status, trust in government and in people, subjective social mobility, concerns about social fairness, and views on the importance of fate in one's life. Moreover, the results hold out even in the sub-sample of low-income people for whom economic considerations more than ethnicity are expected to determine their redistributive preferences. Notwithstanding the importance of shared norms or beliefs in aligning he social choices of people with same ethnic or racial background, our results suggest their population sizes, which possibly reflect their relative influence over domestic policies, also matter. Length: 31 pages Creation-Date: 2024-09 Publication-Status: Published as UPSE Discussion Paper No. 2024-04, September 2024 File-URL: https://econ.upd.edu.ph/dp/index.php/dp/article/view/1557 File-Format: Application/pdf Number: 202404 Classification-JEL: E31, E32, E52 Keywords: inflation; supply and demand; Philippines Handle: RePEc:phs:dpaper:202404 Template-Type: ReDIF-Paper 1.0 Author-Name: Annette O. Balaoing-Pelkmans Author-Name-First: Annette Author-Name-Last: Balaoing-Pelkmans Author-Workplace-Name: School of Economics, University of the Philippines Diliman Author-Name: Adrian R. Mendoza Author-Name-First: Adrian Author-Name-Last: Mendoza Author-Workplace-Name: School of Economics, University of the Philippines Diliman Title: Structural change and industrial upgrading in the Philippines: Stylized facts and routes towards sophisticated economic diversification Abstract: Using time series data from 1945 to 2023, this paper develops stylized facts to trace the historical origins of the Philippines’ narrow economic base. Econometric models are then estimated to analyze the drivers and benefits of economic diversification in the Philippines. The empirical results suggest that re-industrializing the domestic production base can significantly enhance economic diversification. Strategies that accelerate the growth of local industries, especially to catch up with the dominant services sector, are vital. Effective policies should focus on developing physical and human capital, improving connectivity, and fostering domestic innovation. This push for greater diversification is justified by its potential benefits on output and growth stability, and diversification and growth of exports. The paper also explores various routes towards economic diversification and industrial upgrading in the Philippines using the product space approach. The first route is directed towards leapfrogging to a more sophisticated economic structure in the product space. The second route points at climbing the value ladder within global value chains. The third route leads to the strengthening of the local industrial base that is heavily populated by small and medium-sized establishments. Length: 30 pages Creation-Date: 2024-11 Publication-Status: Published as UPSE Discussion Paper No. 2024-05, November 2024 File-URL: https://econ.upd.edu.ph/dp/index.php/dp/article/view/1558 File-Format: Application/pdf Number: 202405 Classification-JEL: L16, O14, O25, O33 Keywords: economic diversification; industrial upgrading; structural transformation; manufacturing; exports; product space; global value chains; SMEs; Philippines Handle: RePEc:phs:dpaper:202105 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: How well has the National Climate Budget supported the 2011-2028 National Climate Change Action Plan? (Or, why a Task Force El Nino?) Abstract: The paper explores how well the National Climate Budget (NCB), starting in 2016, has supported the climate reform agenda articulated in the National Climate Change Action Plan 2011-2028 (NCCAP), now on its 14th year. It observes that the NCB, as appropriated, grew from P175 billion in 2016 to P457.4 billion in 2024, or by 161%, with a sharp increase of P174.8 billion, or 60.3%, occurring between 2022 and 2023. However, the sharp increase in 2023 is accounted for by just two agencies - DPWH and DOTR - whose incremental climate budgets account for 98% of the increase, or P146 billion and P24 billion respectively. Moreover, the share of NCB in the primary budget was only 7.3% on average over the period, and never higher than 10% in any one year, raising doubts about a “whole-of-government” approach to addressing climate change risks and impacts. Among the seven NCCAP strategic priorities, Water Sufficiency accounts for the greatest share at an average of 63.9% of the climate budget every year. Yet recurring El Nino events, which are known to exacerbate water scarcity, continue to require the activation of an ad-hoc mechanism to “ensure the country’s readiness to fight the effects of the El Nino phenomenon”. A deeper dive into the items for Water Sufficiency indicates a budget that is almost totally allocated to flood control and other construction works of DPWH; allocations to strengthen the regulatory environment and better manage the supply and demand of water resources are negligible in comparison. Prospects for advancing water security and mitigating El Nino impacts are discussed. Length: 23 pages Creation-Date: 2024-12 Publication-Status: Published as UPSE Discussion Paper No. 2024-06, December 2024 File-URL: https://econ.upd.edu.ph/dp/index.php/dp/article/view/1559 File-Format: Application/pdf Number: 202406 Classification-JEL: H61, Q57 Keywords: climate change budget; El Nino; climate change; Philippines Handle: RePEc:phs:dpaper:202406