Businessworld in its 9 September 2018 issue covered a UPSE discussion paper co-authored by Professors Raul Fabella and Sarah Lynne Daway-Ducanes on federalism.

Follow this link to the newspaper article entitled “Federalism linked to greater inequality, UP study finds”

Some excerpts from the news article:

Federalism is a “strong predictor” of higher income inequality in developing economies and higher poverty on average for all countries, a study by the University of the Philippines School of Economics (UPSE) said.

“The pro-federalism position claims that federalism will cause poverty to fall and the distribution of income to be more equal. Our regression results bear neither of these claims,” wrote economists Raul V. Fabella and Sarah Lynne Daway-Ducanes in a UPSE discussion paper, “Federalism and Inclusion in Developing Economies.”

“On the contrary, federalism strongly predicts greater income inequality in developing countries. Our results also show that federalism strongly predicts higher poverty incidence and severity on average: it does not reduce poverty incidence and severity in developing economies,” the report added.

While the paper showed that federalism “negatively associates” with income inequality on average, it has an “inequality-increasing effect” in developing economies — defined in the study as those having a real GNI (gross national income) per capita of not more than $10,000 in 1992.

Meanwhile, it found that federalism “has either no effect or a poverty-raising effect.”

“The federalism dummy [variable] in each case has an unconditionally and strongly significant and positive correlation with poverty incidence and poverty severity. In the case of developing economies, it is shown that federalism has no effect at all on poverty incidence or its severity,” said Mr. Fabella and Ms. Daway-Ducanes in the report.

“Federalism thus appears to be on the wrong side of inclusion — in terms of both poverty reduction and greater income equality.”

The authors concluded: “On the debate whether we should shift to federalism, if inclusion is the criterion, our research results finds no support in favor of such despite the claims of proponents. Indeed, the results show that poverty incidence and income inequality could become worse. The contemplated shift appears to be a jump from the frying pan to the fire.”

A  link to the original discussion paper “Federalism and inclusion in developing economies” can be found here.