Template-Type: ReDIF-Article 1.0 Author-Name: Sarah Lynne S. Daway-Ducanes Author-Workplace-Name: University of the Philippines Author-Name: Emmanuel S. de Dios Author-Workplace-Name: University of the Philippines Title: Festschrift for Raul V. Fabella Abstract: This special edition of the Philippine Review of Economics honors Dr. Raul V. Fabella in his 70tth year and recognizes his invaluable contribution to the economics discipline and profession. This edition comprises 13 articles from his colleagues and several generations of former students inspired or mentored by Dr. Fabella who are themselves making their mark in economics. The broad spectrum of topics covered—agricultural economics, competition policy, contract theory, game theory, history of economic thought, international economics, issues in productivity, growth and development, monetary policy, political economy and rent-seeking, public economics, and the theory of teams—are issues that Dr. Fabella himself has written on or taught his students during his long, productive years as a Professor of Economics at the UP School of Economics, nurturing an “oasis of excellence” in his spheres of influence, as well as advocated as a roving academic in his later years, endeavoring to engage policymakers and the public in general, in pursuit of welfare-improving changes for a better Philippines. Classification-JEL: Keywords: Journal: Philippine Review of Economics Pages: vi-vii Volume: 56 Issue: 1 and 2 Year: 2019 Month: June and December File-URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/989/887 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:56:y:2019:i:1and2:p:vi-vii Template-Type: ReDIF-Article 1.0 Author-Name: Hal C. Hill Author-Workplace-Name: Australian National University Author-Name: Sisira Jayasuriya Author-Workplace-Name: Monash University Title: Some reflections on the state of development economics in Asia Abstract: This paper reviews some salient aspects of the state of development economics, from the early post-war pioneers through the major 1989 survey by Nicholas Stern, to contemporary experiences and lessons. The latter is illustrated with references to five South and Southeast Asian countries. While the techniques of economic analysis have become ever more sophisticated and the data bases larger and richer, significant analytical puzzles remain. The central question of why some countries perform well and others indifferently is still imperfectly understood. Because many factors—economic, political, institutional, as well as random events— shape countries’ development trajectories, country economic forecasting over the medium to longer run continues to be as much art as science. Classification-JEL: B20, N15, O53 Keywords: development economics, history of economic thinking, Asia, Philippines, Cambodia, Sri Lanka, Thailand, Singapore Journal: Philippine Review of Economics Pages: 1-15 Volume: 56 Issue: 1 and 2 Year: 2019 Month: June and December File-URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/976/874 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:56:y:2019:i:1and2:p:1-15 Template-Type: ReDIF-Article 1.0 Author-Name: Eli M. Remolona Author-Workplace-Name: Asia School of Business Title: The monkey in the mirror and other tales of central bank forward guidance Abstract: The literature advises central banks to provide forward guidance so as to make themselves predictable to markets. If possible, forward guidance should be Odyssean, in which the central bank commits itself to a clear course of action in the future. Central banks, however, often find themselves defying the theory by offering forward guidance that is rather reticent. Sometimes, the central bank may even deliberately surprise the markets. These departures from theory make sense in markets that behave as Keynesian beauty contests, in which some signals carry inordinate weight and thus lead markets astray. A degree of reticence compels market participants to do their own analysis and offer an independent view that can be useful to central banks. Otherwise, the central bank would find itself merely watching itself in the mirror. In some circumstances, the market may get stuck in a deleterious equilibrium, one born out of a false but well-told narrative. This may call for a “shock and awe” strategy, in which the central bank acts to surprise the market to force a rethinking of the narrative. Classification-JEL: E52, E58, G1, G4 Keywords: forward guidance, Odyssean, Delphic, monetary policy, central bank, Keynesian beauty contest, date-dependent, data-dependent, reticence, shock and awe Journal: Philippine Review of Economics Pages: 16-27 Volume: 56 Issue: 1 and 2 Year: 2019 Month: June and December File-URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/977/875 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:56:y:2019:i:1and2:p:16-27 Template-Type: ReDIF-Article 1.0 Author-Name: Benjamin E. Diokno Author-Workplace-Name: Bangko Sentral ng Pilipinas Title: A BSP closer to the people: spreading the benefits of monetary and financial stability Abstract: This article tackles the efforts of the Bangko Sentral ng Pilipinas (BSP) to bring the achievement of its core mandates closer to the Filipino people. It examines the complex operating environment characterized by a narrowing policy space for central banks of advanced economies, the increasing scope of central bank objectives outside traditional monetary policy, greater global connectedness, and the rise of the Fourth Industrial Revolution. Moreover, it outlines the BSP’s policy directions and priorities going forward. More importantly, the article also discusses how, even in a complex operating environment, the benefits of BSP’s delivery of its mandates can be brought closer to the people. Classification-JEL: E02, E52, E58, E59 Keywords: Bangko Sentral ng Pilipinas, financial stability, monetary stability, financial inclusion Journal: Philippine Review of Economics Pages: 28-41 Volume: 56 Issue: 1 and 2 Year: 2019 Month: June and December File-URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/978/876 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:56:y:2019:i:1and2:p:28-41 Template-Type: ReDIF-Article 1.0 Author-Name: Jahm Mae E. Guinto Author-Workplace-Name: University of the Philippines Author-Name: Charlotte May DC. Amante Author-Workplace-Name: University of the Philippines Author-Name: Franz Nicole L. Carlos Author-Workplace-Name: University of the Philippines Author-Name: Arlene B. Daro Author-Workplace-Name: University of the Philippines Author-Name: Mariella Jasmin P. Marasigan Author-Workplace-Name: University of the Philippines Author-Name: Joseph J. Capuno Author-Workplace-Name: University of the Philippines Title: Digit ratio and prosocial behavior: the role of innate aggression in public goods and trust games Abstract: Following previous studies that found individuals with shorter index fingers relative to ring fingers (low digit ratio) exhibit aggressive behavior in adulthood, in this study we use the left digit ratio, a putative marker for in-utero testosterone exposure [Manning et al. 1998], as an indicator of predisposition towards aggression to investigate its relation to prosocial behavior in the context of economic games. First, we ask if aggressive individuals and not-aggressive ones inherently differ in their prosocial behavior, independent of the features of the game. Second, we ask if the differences in their initial or subsequent prosocial behavior, if any, are conditioned by their respective experiences as the game progresses. Applying regression analyses on sample observations from two classroom experiments of modified public-goods games and trust games (by Carlos and Marasigan [2017] and Amante and Daro [2018], respectively), our results show that innate aggression per se is not associated with prosocial behavior. We find some evidence that innately aggressive, prosocial players who have experienced unfavourable or unfair outcomes in previous rounds tend to punish more intensely the non-cooperative players in public goods games, but continue to be generous towards selfish co-players in trust games. Thus, we posit that aggressive individuals who want to establish their perceived dominance (status) in a team behave prosocially initially, then later either elicit the cooperation of other players through aggressive punishment in the public goods game or unilaterally improve social welfare even at a personal cost to them in the trust game. Classification-JEL: C71, C91, C92, D91 Keywords: Digit ratio, 2D4D, prosocial behavior, aggression, public goods game, trust game Journal: Philippine Review of Economics Pages: 42-72 Volume: 56 Issue: 1 and 2 Year: 2019 Month: June and December File-URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/979/877 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:56:y:2019:i:1and2:p:42-72 Template-Type: ReDIF-Article 1.0 Author-Name: Orville C. Solon Author-Workplace-Name: University of the Philippines Title: A note on cooperative hunting (Holmstrom and Fabella meet the Dumagat of Tanay) Abstract: This paper examines social institutions and norms related to cooperative big game hunting by introducing these explicitly into the basic economic model used to analyze moral hazard in teams [Holmstrom 1982]. Features built into Holmstrom’s basic model include effort to locate and acquire game, trophy taking and carcass sharing among members of a hunting party. The insights offered here are inspired by the norms of the Dumagat of Tanay in hunting, meat sharing and trophy taking. Among the Dumagat, the individual who acquires the game takes the head and the feet as trophy. The rest of the carcass is divided up along the lines described by Fabella’s [1988] natural team sharing formula. Classification-JEL: J23, J24 Keywords: team sharing, team productivity, teams Journal: Philippine Review of Economics Pages: 73-79 Volume: 56 Issue: 1 and 2 Year: 2019 Month: June and December File-URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/980/878 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:56:y:2019:i:1and2:p:73-79 Template-Type: ReDIF-Article 1.0 Author-Name: Karl L. Jandoc Author-Workplace-Name: University of the Philippines Author-Name: James A. Roumasset Author-Workplace-Name: University of Hawaii Title: The case against the case for land reform: transaction costs and misplaced exogeneity Abstract: The paper reviews the pros and cons of land reform with particular attention to the Philippines. We find a repeated theme in supporting arguments for land-to-the-tiller reform and the outlawing of share tenancy: that land reform will improve efficiency by lowering transaction costs. We show that this is logically incorrect and fails to draw appropriate lessons from the evidence. More generally, the arguments for land reform suffer from misplaced exogeneity, in particular by implicitly regarding farm size and organizational form as exogenous. Classification-JEL: O13, R52 Keywords: land reform, farm size, inverse relationship, share tenancy Journal: Philippine Review of Economics Pages: 80-126 Volume: 56 Issue: 1 and 2 Year: 2019 Month: June and December File-URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/981/879 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:56:y:2019:i:1and2:p:80-126 Template-Type: ReDIF-Article 1.0 Author-Name: Arsenio M. Balisacan Author-Workplace-Name: Philippine Competition Commision Title: Toward a fairer society: inequality and competition policy in developing Asia Abstract: Rising inequality poses a serious threat to sustained growth and poverty reduction in developing Asia. Many countries in the region have adopted competition policy—also known as antitrust—to promote economic welfare by protecting competitive processes, as well as in consideration of public interests, including social equity. This paper uses the Philippine experience to illustrate the conceptual and institutional issues in operationalising competition policy for development. Competition policy in the Philippines has historical roots in its struggle for economic and social reforms aimed at achieving inclusive development. Effectively framing competition policy to stay close to its core guiding principle is key to its effectiveness in contributing to inclusive development. The paper concludes that, in the Philippine context, adhering to consumer welfare standards in competition policy promotes a fairer social outcome (i.e., reduction of income inequality and poverty) while improving economic efficiency. Classification-JEL: I30, L40, K21, O15, O53, O57 Keywords: Competition policy, antitrust, welfare, income distribution, economic development, Philippines Journal: Philippine Review of Economics Pages: 127-146 Volume: 56 Issue: 1 and 2 Year: 2019 Month: June and December File-URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/982/880 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:56:y:2019:i:1and2:p:127-146 Template-Type: ReDIF-Article 1.0 Author-Name: Ma. Joy V. Abrenica Author-Workplace-Name: University of the Philippines Title: Sovereign determination or disguised protectionism?: the Vitamin C Case Abstract: When a sovereign state vouches for the anti-competitive behaviour of its producers, it is incumbent upon the courts to abstain from adjudicating and allow economic diplomacy to take its course. The recent decision of the US Supreme Court on a cartel case involving Chinese exporters of vitamin C appears to favour pro-active judicial enforcement of antitrust law, however. Comity among nations calls for giving due deference to the legitimate choices of others with respect to regulating competition in their own industries. But a state harmed by the anti-competitive conduct of foreign producers faces the difficult choice between protecting its own interest and avoiding intrusion into the conduct of another sovereign state. This paper explores this conundrum, which has implications on states with a development agenda that subordinates competition to industrial goals. Classification-JEL: L52, F1 Keywords: export cartel, international comity, foreign sovereign compulsion, industrial policy Journal: Philippine Review of Economics Pages: 147-172 Volume: 56 Issue: 1 and 2 Year: 2019 Month: June and December File-URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/983/881 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:56:y:2019:i:1and2:p:147-172 Template-Type: ReDIF-Article 1.0 Author-Name: Mitzie Irene P. Conchada Author-Workplace-Name: De La Salle University Author-Name: Dominique Hannah A. Sy Author-Workplace-Name: De La Salle University Author-Name: Marites M. Tiongco Author-Workplace-Name: De La Salle University Author-Name: Alfredo R. Paloyo Author-Workplace-Name: University of Wollongong Title: Recent trends in the gender gap in the labor market in the Philippines Abstract: TWe use linear and nonlinear decomposition methods to explore recent trends in male-female differentials in labor market performance in the Philippines. Using the 2018 Labor Force Survey, we calculate an unadjusted wage gap of 5.77 percent, an employment rate gap of 0.36 percentage points, and a labor force participation rate gap of 19 percentage points. We provide further context by showing the evolution of these figures over time (2002-2018), which indicates that women generally perform worse in the labor market than men as measured by the pay gap and the gap in labor force participation (LFP). The decomposition exercise reveals that the pay and LFP-rate differentials are largely due to women receiving lower returns to their observable characteristics relative to men. The gender gap in employment status is not significant. Classification-JEL: J16, J21, J71 Keywords: Philippines, gender gap, discrimination, decomposition Journal: Philippine Review of Economics Pages: 173-186 Volume: 56 Issue: 1 and 2 Year: 2019 Month: June and December File-URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/984/882 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:56:y:2019:i:1and2:p:173-186 Template-Type: ReDIF-Article 1.0 Author-Name: Emmanuel F. Esguerra Author-Workplace-Name: University of the Philippines Title: Automation, gigs, and other labor market tales: the Philippines in the Fourth Industrial Revolution Abstract: The paper discusses two topics that frequently surface in conversations about the Fourth Industrial Revolution (4IR): the threat of labor displacement due to automation and the growth of alternative employment arrangements. Using the “task approach” to review recent research on the “future of work” in the Philippines, the paper argues that predictions not informed by the task intensity of jobs are less compelling. The “job polarization” thesis is also examined and the observation made that changes in the occupational distribution of employment seem to be more closely associated with a structural transformation explanation. In the second part, the “gig economy” is discussed in the broader context of work arrangements that have emerged and disrupted the standard employment relationship. The limitations of household-based labor force surveys as a source of data on gig activity are noted. The paper concludes with a brief discussion of 4IR challenges in terms of human resource development, unemployment protection, and the reform of labor laws. Classification-JEL: J20, J24, J41, J48, J88, K31, O33 Keywords: technology, tasks, gig economy, non-standard work Journal: Philippine Review of Economics Pages: 187-218 Volume: 56 Issue: 1 and 2 Year: 2019 Month: June and December File-URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/985/883 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:56:y:2019:i:1and2:p:187-218 Template-Type: ReDIF-Article 1.0 Author-Name: Sarah Lynne S. Daway-Ducanes Author-Workplace-Name: University of the Philippines Author-Name: Irene Jo E. Arzadon Author-Workplace-Name: University of the Philippines Title: Revisiting the aid-growth nexus in light of the Sachs-Easterly debate Abstract: In light of the renewed interest on the aid-growth connection spurred by the recent Sachs-Easterly debates, this note revisits the aid-growth nexus, hypothesizing that aid impacts on growth nonlinearly and that its particular effect conditions on the quality of policies and governance. Using the dynamic panel estimation method, Two-step system generalized method of moments, on more recent data involving an unbalanced panel of 106 countries for the period 1989-2013, we verify some key findings in the aid-growth literature. In particular, aid’s effect on growth is subject to diminishing returns, indicating that there are absorptive capacity constraints that may hinder the effectiveness of aid. However, these absorptive capacity constraints may be relaxed in environments of good governance and policy, enabling aid to have a positive impact on growth. Classification-JEL: C14, C23, F35, O11, O19 Keywords: aid, policy, governance, diminishing returns to aid, growth Journal: Philippine Review of Economics Pages: 219-235 Volume: 56 Issue: 1 and 2 Year: 2019 Month: June and December File-URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/986/884 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:56:y:2019:i:1and2:p:219-235 Template-Type: ReDIF-Article 1.0 Author-Name: Rhea M. Molato-Gayeres Author-Workplace-Name: Asian Development Bank Title: Public debt and the threat of secession Abstract: This paper establishes a model of public debt as a strategic instrument in preventing secession. Using a dynamic game with perfect information, it shows that debt can be used to pre-empt a country’s separation if the seceding region’s potential gain from independence is strictly decreasing in debt. If so, the national government can prevent this region from leaving the union by setting higher levels of debt so that it reaches a certain threshold level. When the debt level is sufficiently high, this region will find it more beneficial to stay with the union rather than to become an independent state. This paper also finds that the majority region may use debt as a strategic instrument to preserve the union if it is better off in a country with debt than as a separate state with savings. Classification-JEL: H77, H63, H30 Keywords: secession, debt, fiscal policy, sovereign debt Journal: Philippine Review of Economics Pages: 236-256 Volume: 56 Issue: 1 and 2 Year: 2019 Month: June and December File-URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/987/885 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:56:y:2019:i:1and2:p:236-256 Template-Type: ReDIF-Article 1.0 Author-Name: Emmanuel S. de Dios Author-Workplace-Name: University of the Philippines Title: What the new institutional economics owes Marx Abstract: The bicentennial of Marx’s birth (2018) and the earlier sesquicentennial of Capital’s publication (2017) are opportunities to examine aspects of new institutional economics and incentive theory with an affinity to or origin in concepts first put forward by Marx. A major idea pertains to industrial organization and the theory of the firm. We compare Marxian and new-institutional insights and conversely attempt to interpret some of Marx’s ideas from a new-institutional viewpoint. Classification-JEL: B14, B25, B52, D23 Keywords: institutions, Marxian economics, new institutional economics, employment relationship, transactions costs, theory of the firm Journal: Philippine Review of Economics Pages: 257-278 Volume: 56 Issue: 1 and 2 Year: 2019 Month: June and December File-URL: http://pre.econ.upd.edu.ph/index.php/pre/article/view/988/886 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:56:y:2019:i:1and2:p:257-278