Template-Type: ReDIF-Article 1.0 Author-Name: Nanak Kakwani Author-Workplace-Name: University of New South Wales Author-Name: Zakaria Siddiqui Author-Workplace-Name: Jamia Millia Islamia University Title: Shared prosperity characterized by four development goals: pro-poor growth, pro-poor development, inclusive growth, and inclusive development Abstract: This paper is on shared prosperity and its measurement. Economic growth enhances total prosperity, increasing the economic pie in society, but the pie distribution determines how the population shares the pie. Based on a social welfare framework, we have developed an integrated methodology to evaluate growth and distribution simultaneously. Linking the two phenomena gives rise to four development goals: (i) pro-poor growth, (ii) inclusive growth, (iii) pro-poor development, and (iv) inclusive development. These four goals provide an alternative characterization of shared prosperity. The paper defines the four goals, providing a methodology to operationalize them using real-world data. The empirically measured goals inform at what rate the shared prosperity is enhancing in any country or the world. The methodology is applied globally to determine whether the growth and development have been pro-poor and inclusive in 173 countries over the two decades in the new millennium. Classification-JEL: D63, D31, O11, O20, O47 Keywords: shared prosperity, pro-poor growth, inclusive growth and development, poverty, inequality Journal: Philippine Review of Economics Pages: 1-24 Volume: 60 Issue: 2 Year: 2023 Month: December File-URL: https://pre.econ.upd.edu.ph/index.php/pre/article/view/1041/966 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:60:y:2023:i:2:p:1-24 Template-Type: ReDIF-Article 1.0 Author-Name: Raul V. Fabella Author-Workplace-Name: University of the Philippines Author-Workplace-Name: Asian Institute of Management Title: Piketty inequality, meta-market failures and the new role of the state Abstract: We argue that the celebrated 2014 Piketty thesis that thriving markets in advanced economies generate an ever increasing income inequality restores policy relevance to the Second Fundamental Theorem of Welfare and restores the role of the state in economics which the First Fundamental Theorem of Welfare seems, and the neoconservatives claim, to have marginalized. The Piketty thesis disproves the Kuznets hypothesis which says that the equity-deficit of market allocation is a temporary inconvenience which will dissipate as per capita income grows, thus, making state intervention unnecessary. Policies that enhance per capita growth may then replace policies of direct redistribution in the pursuit of equity. Piketty insists that this phenomenon is not due to some garden variety market failure but is due to the very dynamic that drives market prosperity, viz., private ownership of and the free enterprise deployment of capital. It is thus a meta-market failure. In properly functioning capitalist markets henceforth, the state still needs to directly push back on this metamarket failure to save capitalism from its own excesses and democracy from becoming collateral damage. Classification-JEL: D31, D33, D63, 04 Keywords: Piketty inequality, role of the state, meta-market failure, fundamental theorems of welfare, well-behaved markets Journal: Philippine Review of Economics Pages: 25-38 Volume: 60 Issue: 2 Year: 2023 Month: December File-URL: https://pre.econ.upd.edu.ph/index.php/pre/article/view/1042/967 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:60:y:2023:i:2:p:25-38 Template-Type: ReDIF-Article 1.0 Author-Name: Margarita Debuque-Gonzales Author-Workplace-Name: Philippine Institute for Development Studies Title: Diamond and Dybvig in developing economies and in a digital world Abstract: The Nobel prize-winning article of Douglas Diamond and Philip Dybvig, entitled “Bank runs, deposit insurance, and liquidity” and published by the Journal of Political Economy in 1983, has spawned a large literature, including on emerging markets and developing economies. In a nod to Diamond and Dybvig, this paper reviews this subset of the literature, which has received relatively less attention than the rest despite the greater risk of banking crises in these economies; it then examines whether the seminal article remains relevant against the rapid digital transformation of financial systems today. Models that adopted their basic ideas helped drive home the importance of maintaining sound macroeconomic fundamentals and keeping confidence levels high in bank-centered economies. Similarly applying their framework to assess the impact of the current evolution of financial systems also reveals valuable insights, such as low risk from financial technology, for now, but possible shadow banks in those settings, and allows for generally better analysis, including pointing out possible blind spots when adopting new concepts, such as central-bank-issued digital currencies. Classification-JEL: E02, E58, G01, G21 Keywords: Nobel prize, bank run, banking, financial intermediation, financial crises, financial fragility, liquidity crises Journal: Philippine Review of Economics Pages: 39-63 Volume: 60 Issue: 2 Year: 2023 Month: December File-URL: https://pre.econ.upd.edu.ph/index.php/pre/article/view/1043/968 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:60:y:2023:i:2:p:39-63 Template-Type: ReDIF-Article 1.0 Author-Name: Delano S. Villanueva Author-Workplace-Name: International Monetary Fund Title: Toward a general neoclassical theory of economic growth Abstract: The Harrod-Domar (H-D) growth model assumes a fixed capital-output ratio, signifying absence of substitutability between capital and labor, leading to a “knife-edge” problem wherein balanced growth of capital (fixed warranted rate) and labor (fixed natural rate) occurs only by accident, preventing the attainment of macroeconomic stability with full employment. The neoclassical Solow-Swan (S-S) growth model provides an elegant solution to the H-D problem by endogenizing the warranted rate via the saving-investment relation, wherein capital growth is a function of a fully adjusting income-capital ratio (inverse of the H-D capital-output ratio)— allowing for smooth substitutability between capital and labor while keeping the natural rate exogenously fixed. The S-S model implies a positive, albeit temporary output growth effect of a higher saving rate. The present paper extends the capital-labor ratio’s influence onto the natural rate via effects on labor productivity through a modified Arrow learning by doing framework, and via labor participation through real wage adjustments. Thus, the positive output growth of a higher saving rate, although temporary in the short run as in the S-S model, is permanent in the long run through adjustments in both the warranted and natural rates—a generalization of the Solow-Swan model. Classification-JEL: E130, O410 Keywords: Harrod-Domar, neoclassical growth model, Solow-Swan, warranted rate, natural rate, balanced growth, learning by doing, labor participation Journal: Philippine Review of Economics Pages: 64-80 Volume: 60 Issue: 2 Year: 2023 Month: December File-URL: https://pre.econ.upd.edu.ph/index.php/pre/article/view/1044/969 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:60:y:2023:i:2:p:64-80 Template-Type: ReDIF-Article 1.0 Author-Name: Dannah Ysabel M. Premacio Author-Workplace-Name: University of the Philippines Author-Name: Ezra Rebecca G. Vidar Author-Workplace-Name: University of the Philippines Author-Name: Toby C. Monsod Author-Workplace-Name: University of the Philippines Title: Measuring fiscal policy sustainability in developing Asia: what does the Markov Switching Augmented Dickey-Fuller Test tell us? Abstract: This paper measures fiscal sustainability in 22 developing Asian countries for the period 1999–2017. Previous literature generates conflicting results: one paper applies the usual stationarity and cointegration tests and finds that fiscal policy is sustainable but in weak form. Another paper employs a fiscal reaction function and finds that fiscal policy is unsustainable. This paper uses an expanded version of the Markov Switching Augmented Dickey-Fuller test (MS-ADF), which remedies the shortcomings of conventional stationarity tests to provide more statistical power in the presence of nonlinearities and structural breaks. The MS-ADF has never been applied to this set of countries. Results show that the majority of the countries have “uncertain” debt trajectories, not definitively sustainable or unsustainable but somewhere in-between. This is a more nuanced picture of the debt trajectories in the region relative to what is obtained using the established methods. A more nuanced assessment could lead to more suitable policy corrections. Classification-JEL: H63, C22 Keywords: fiscal policy sustainability, public debt, stationarity test, Markov Switching-ADF Journal: Philippine Review of Economics Pages: 81-103 Volume: 60 Issue: 2 Year: 2023 Month: December File-URL: https://pre.econ.upd.edu.ph/index.php/pre/article/view/1045/971 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:60:y:2023:i:2:p:81-103 Template-Type: ReDIF-Article 1.0 Author-Name: Kristyl Obispado Author-Workplace-Name: University of the Philippines Title: The 16th century Carrera del Pacífico: its sailor-merchants and their trade goods Abstract: This article focuses on the sailors who served during the initial years of the Carrera del Pacífico, one of the globalizing projects of the Spanish Monarchy. In particular, the paper aims to examine the sailors who took advantage of the Pacific trade circuits by actively participating in various income-generating activities created by the Carrera. Using the sailors’ economic endeavors, especially as sailor-merchants, as a lens can elucidate how early global trade was conducted and demonstrate the dynamics of the early Pacific trade. The paper argues that by seizing the opportunities presented by the Carrera, primarily by assuming the dual roles of sailors and merchants, these laborers helped consolidate the Spanish-Pacific region and reshape the consumption pattern of its local population. The sailors engaged in the transportation, sale, and purchase of global commodities during the early modern period, including textiles and chinaware, which catered to the demands of the broader consumer base in Spanish America. The sources draw data from the Royal Treasury of Acapulco registers during its first decade (1590-1600), where 1,574 sailors were identified. It belongs to Archivo General de Indias’ Contaduría (Account) records, which contain the duties of commodities entering and leaving the port of Acapulco. Classification-JEL: F13, B15, B17, N76 Keywords: Pacific trade, sailor-merchants, early globalization, Philippine-Chinese goods Journal: Philippine Review of Economics Pages: 104-137 Volume: 60 Issue: 2 Year: 2023 Month: December File-URL: https://pre.econ.upd.edu.ph/index.php/pre/article/view/1046/970 File-Format: Application/pdf Handle: RePEc:phs:prejrn:v:60:y:2023:i:2:p:104-137