Transcript Source - World Bank

Rising growth, declining investment
The puzzle of the Philippines
Breaking the “Low-Capital-Stock” Equilibrium
Alessandro Magnoli Bocchi
Washington, DC
December 12, 2007
Table of contents
1. The puzzle: an open and growing economy, but investment is declining
1a. What’s falling is domestic investment
1b. Despite a more favorable environment, appetite is low
2. Why the decline? Investment is not a driver of current growth
2a. The public sector cannot invest
2b. The capital-intensive private sector does not want to invest
2bi. Insufficient public investment
2bii. Expensive inputs
2c. The rest of the private sector does not need to invest
3. What keeps growth going? The least protected sectors of the economy
3a. Unhappy work-seekers leave and send remittances, fuelling consumption
3b. The service sector boost exports, lifting growth
4. What is the result? The economy is in a “Low-Capital-Stock” equilibrium
5. Why is this a concern? Growth could be faster and more inclusive
6. What can be done? Diversify the economy and gradually push reforms
6a. Pursue better-performing economic zones and a competitive exchange rate
6b. Increase revenues, to finance spending in infrastructure and education
6c. Gradually reduce élite-capture, to lower the cost of strategic inputs
Bibliography
Methodology (2/3 BC + 1/3 NEG)

Binding Constraints. Growth diagnostics - a framework for discerning policy
priorities and their desired sequence - is based on three considerations:



First, increasing econ. growth rates is the key challenge that developing nations face.
Second, an identical growth strategy for all countries, regardless of their
circumstances, is not likely to prove productive.
Third, to provide governments with a long, unprioritized list of reforms is not helpful.

This study identifies binding constraints on economic activity, and hence a set of policy
levers, which - once targeted on these constraints - is likely to have the greatest impact.

New Economic Geography. Economic activity is concentrated.


Across the world, the unevenness of growth between and within countries reflects
market forces associated with economies of scale and movements of goods and
factors, as well as competing political interests.

While economic concentration is usually desirable for economic growth, the large
spatial disparities in welfare levels that often accompany this agglomeration are not.
This study proposes how the inevitable economic concentration should managed, to exploit
the gains from agglomeration while ensuring that individual well-being does not depend
excessively on location.
The puzzle: In an open and growing economy, why
does investment decline?
The Filipino economy:



is open to trade and capital inflows; and
since 2002, growth has averaged 5.3 percent
Over the last 15 years, however, domestic investment:



has been stagnant in real terms; and
consistently declining as a share of GDP
1. Growth with declining investment … in a service economy
35
8
Aquino's assassination
Share of Services in GDP (%)
Coup attempts
6
30
China
4
2002
2006
25
2
Asian crisis
Malaysia
0
%
% GDP
20
Economic reforms
15
Marcos leaves
-2
-4
Philippines
10
-6
5
-8
Fixed Investment
GDP Growth (secondary axis)
-10
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
0
Thailand
Source: National Statistical Coordination Board, 2007.
0
10
20
30
40
50
Source: Asian Development Outlook, 2007.
60
1a. Domestic investment falls … because of lower private outlays
35
Fixed capital formation
Aquino's assassination
35
Others
Marcos leaves
30
Coup attempts
30
Durable Equipment
Economic reforms
25
Construction (public)
Construction (private)
Asian crisis
25
20
20
Private Domestic Investment
15
% GDP
% GDP
Total Domestic Investment
15
10
10
5
Public Domestic Investment
5
FDI
Source: National Statistical Coordination Board, 2007.
0
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
0
1b. A more favorable environment :
A current account surplus
… and rising capital inflows
8000
Net Capital Inflows
10
6000
8
Aquino's assassination
Coup attempts
Asian crisis
4000
Coup attempts
4
Marcos leaves
2000
% GDP
2
0
04
06
20
02
20
00
20
20
96
98
19
94
19
92
19
19
88
90
19
86
19
84
19
19
80
82
19
-2
-4
-2000
Asian crisis
-4000
-6
-8
Aquino's assassination
-6000
Economic reforms
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
0
19
Current Account Balance (NSA, USM)
Marcos leaves
6
Economic reforms
Source: Central Bank of the Philippines, 2007.
-10
(1)
1b. A more favorable environment :
Increased liquidity
Lending looks profitable
Contributions to M3 growth (%)
Lending and deposit rates (%)
35
7
Net foreign assets
Net domestic credit (private)
Net domestic credit (public)
M3 growth
30
(2)
Real lending rate
Real deposit rate
Lending-deposit spread
6
5
25
4
20
3
15
2
10
1
0
5
2002
2003
2004
2005
2006
-1
0
2002
2003
2004
2005
2006
-5
Source: Central Bank of the Philippines, 2007.
-2
-3
Source: Asian Development Outlook, 2007.
1b. … still, over the last 15 years, fixed investment decreased
Real Fixed Investment
Gross Fixed Investment as % of GDP (Nominal)
(Level. SA. 2000-01=1)
1.8
44%
1.6
39%
34%
Korea
China
1.4
Indonesia
29%
Malaysia
Thailand
1.2
Trend Growth 2002 Q1 - 2006 Q4
Investment GDP
Indonesia
8.2%
5.2%
Malaysia
4.6%
6.2%
Philippines -0.2% 6.0%
Thailand
10.3% 5.7%
Malaysia
Thailand
Philippines
Indonesia
24%
1.0
19%
Philippines
14%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Source: World Bank, 2006a.
Q1
-2
00
2
Q3
-2
00
2
Q1
-2
00
3
Q3
-2
00
3
Q1
-2
00
4
Q3
-2
00
4
Q1
-2
00
5
Q3
-2
00
5
Q1
-2
00
6
Q3
-2
00
6
0.8
2. Investment is not a driver of current growth

In the Philippines, investment does not grow at the pace
of GDP. Three reasons explain this puzzle:

a. The public sector cannot afford it ;

b. The capital-intensive private sector does not want
to expand that fast ; and

c. The non-capital-intensive private sector does not
need to invest.
2a. The public sector cannot invest

Constrained by serious fiscal pressures, due to:




decades of weak revenue performance;
a weighty debt service; and
a high cost of inputs
it cannot keep public investment growing at GDP
growth rates.
2b. The capital-intensive private sector does
not want to invest

It does not find it convenient to expand investment at the
economy’s fast pace, as it expects little returns.

The marginal product of capital (MPK) is low, because:


i) the public sector does not invest enough to provide incentives for
private investment; and

ii) inputs are expensive because of élite-capture in the traditional
sectors of the economy (agriculture, sea and air transport, power,
cement, mining, banking, etc).
Controlled by the local élite, the conglomerates use political
connections to drive potential investors out, discourage
smaller firms to grow bigger, and enjoy oligopolistic rents.
2b. The capital-intensive private sector does not want to invest
Declining MPK
…
and little appetite for investment
Tobin's q
Domestic credit to private sector
6
70
5
Asian crisis
60
Aquino's assassination
Market value/asset value
Marcos leaves
50
4
% GDP
Coup attempts
3
40
30
2
20
Economic reforms
1
10
Average (China, Indonesia, Malaysia, Thailand)
Philippines
05
04
20
03
20
02
20
01
20
00
20
99
20
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
19
89
19
88
19
19
Source: S&PIFC EMDB - Price to Book Value Ratios.
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
0
0
Source: Central Bank of the Philippines, 2007.
2b. The private sector expects low returns. MPK is low
Government
Macroeconomic
concerns and
fiscal adjustment
Regulatory uncertainty,
anticompetitive practices, and
(volatility in) corruption
Rules and
regulations
protect
oligopolies
Barriers to Entry
Firms
Low tax collection
Low Public Savings
2bi. Insufficient Public Investment
Low MPK
Source: Author.
K-intensive Sectors:
Oligopolies
 Agriculture (rice)
 Transport
 Power & cement
 Mining & banking
Pricing power
2bii. Expensive Inputs
Non K-intens. Sectors:
Competition
 Electronics
assembly
 Call centers BPOs
2bi. As the Government struggles with severe
fiscal pressures, public investment keeps falling
Sectoral Budget Allocations, 2004-2006
2004 2005 2006
Economic Services
19.4 17.2 18.7
Agric. & Agr. Reform
3.3
2.8
2.6
Social Services
28.9 27.7 27.9
Education
14.9 14.7 13.9
Health
1.7
1.4
1.3
Defense
4.9
4.8
5.0
General Public Services
16.1 15.4 15.3
Net Lending
0.7
0.8
0.8
Debt Interest Payments
30.1 34.1 32.3
Total
100.0 100.0 100.0
Source: Government and Ateneo Center for Economic Research and Development, 2007.
2bii. Rice rents : domestic price above world price
Domestic and World Rice Prices
25.00
World price
Domestic price
20.00
Pesos per kg
15.00
10.00
5.00
19
87
19
87
19
88
19
88
19
89
19
89
19
90
19
91
19
91
19
92
19
92
19
93
19
94
19
94
19
95
19
95
19
96
19
96
19
97
19
98
19
98
19
99
19
99
20
00
20
01
20
01
20
02
20
02
20
03
20
03
20
04
20
05
20
05
0.00
Source: World Bank, 2006 and 2007b.
2bii. Transport and cement: oligopolistic rents
Exporting a container costs up to three times more…
20-footer container
US Dollars
Philippines
1,336
Thailand
848
China
335
Singapore
382
Source: World Bank (Cross-Border Trading, 2006)
Cement prices are the highest …
Cement
Price (US$ per tonne, Q4-06)
Philippines
72
Indonesia
69
Vietnam
65
India
52
Thailand
50
Malaysia
49
China
35
Source: JP Morgan and National Associations
… and consumption is the lowest
Cement
Per Capita Consumption (kgs)
China
India
Thailand
450
Malaysia
477
Vietnam
316
Indonesia
144
Philippines
128
Source: Cement Manufacturers Associations
2c. The rest of the private sector does not
need to invest

The fast-growing businesses:



electronics assembly;
voice-based business process outsourcing (BPO); and
information and communication technology (ICT)
do not need to increase their investment at GDP growth rates
to enjoy fast-rising profits.
2c. The rest of the private sector does not need to invest
Services are growing fast
… and are less capital-intensive
Contributions to GDP growth (%)
25
7
Services
Industry
Agriculture
Overall GDP
6
20
Industry Investment
% GDP
5
4
15
10
3
Agriculture Investment
2
5
Services Investment
1
19
80
19
83
19
86
19
89
19
92
19
95
19
98
20
01
20
04
0
0
2002
2003
2004
2005
2006
Source: National Statistical Coordination Board, 2007.
Source: Author on NSCB, 2007.
3. Despite the decline in investment, the economy
keeps growing

The least protected sectors - the informal labor market
and the non-capital-intensive activities - stimulate
demand and drive supply:

a. On the demand-side, massive migration results in
remittances and transfers (13 percent of GDP)
which fuel consumption-led-growth - and lower the
penalty for élite-capturing policies

b. On the supply-side, the service sector and a few
non-capital-intensive manufactures, free from rentcapturing regulations, boost exports
3a. Workers cannot easily enter into the formal labor market
Quarterly Unemployment Rate
Average monthly wages (by sector)
15
35%
Philippines
Services
13
11
%
9
7
China (Urban)
5
Nominal pesos/GDP per capita
30%
Total
25%
Industry
20%
Agriculture
3
Malaysia
15%
Thailand
Source: National Statistical Coordination Board, 2007.

20
03
20
01
19
99
19
97
19
95
19
93
19
91
19
89
19
87
19
85
10%
19
83
Q1
-
20
Q3 00
-2
0
Q1 00
-2
0
Q3 01
-2
0
Q1 01
-2
0
Q3 02
-2
0
Q1 02
-2
0
Q3 03
-2
0
Q1 03
-2
0
Q3 04
-2
0
Q1 04
-2
0
Q3 05
-2
0
Q1 05
-2
0
Q3 06
-2
00
6
1
Source: Author on Lanzona and NSCB, 2007.
Wage setting does not reflect supply and demand
3a. Rents secure “national labor peace”
Wages are high
…
even for skilled workers.
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
(November 2005. In US Dollars)
1800
Malaysia
Source: JETRO 16th
Survey of Investment
Related Cost Comparison in
Major Cities and regions in
Asia. March 2006.
1500
Thailand
China
Philippines
Indonesia
Bangladesh
Vietnam
0
50
100
Mid-level Managers
GNI per capita
Monthly Wages in Low and Middle Income Asia
Shanghai
1200
Bangalore
900
Qingdao
200
Hanoi
250
Average monthly wage worker in USD
Source: JETRO 16th Survey of Investment Related Cost and World Bank
Shenzen
Jakarta
600
India
150
Kuala Lumpur
Manila
Bangkok
Dhaka
300
0
0
50
100
150
200
250
Workers (General Industry)

Insider wage premia: rents pay higher wages - relative to other Asian countries
– to the formal sector salaried insiders.
3a. The informal sector prevails and a quarter of the
domestic labor force works abroad
Fifty percent of unsalaried workers
Rapid remittances growth
Remittances inflows
Share of employed
200
120.0
180
100.0
160
Unpaid family workers
Own account
60.0
Wage and salaried
40.0
World
140
(in US$, 2000=100)
80.0
Philippines
120
100
80
60
20.0
40
0.0
20
Source: National Statistics Office
Source: National Statistical Coordination Board, 2007.
0
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
1996 1998 2000 2002 2004 2006
Source: World Bank, 2007.
3a. Qualified workers are increasingly moving overseas
 Despite the higher wages in the service sector, 32.3 percent of
the unemployed were high-school graduates and 18.4 percent
were college graduates.
Overseas Workers by Occupation
Based on work contracts only
In percent
Service workers
Professional and technical
Production
Clerical
Sales
Administrative and managerial
Agricultural
1993
34.9
25.3
36.4
1.6
1.0
0.1
0.7
2004
40.2
33.4
22.6
1.9
1.4
0.2
0.2

The flows of remittances and
transfers from overseas
workers have grown rapidly …

… boosting - and reducing
the volatility of - private
consumption
Source: Philippine Overseas Employment Administration
3b. The non-K-intensive sector boost exports, lifting growth
Semiconductors lead exports
TFP is leading the way
Contributions to export growth
Growth accounting
16
Semiconductors
Other manufactures
Garments & textiles
Mineral and petroleum products
Agro-based and forest products
Export growth
14
12
4.0
2.0
0.0
10
-2.0
8
-4.0
6
-6.0
4
-8.0
1960-80
2
1981-85
1986-03
2004-06
COntribution to growth
0
2003
2004
2005
2006
Physical K Human K TFP
-2
Source: National Statistical Coordination Board, 2007.
Source: World Bank, 2007a.
 Growth comes from non-capital-intensive manufactures and services
4. In equilibrium at a low-level of capital stock
 In the status quo corporate conglomerates use the political system to limit
economic entry & create rents, and then use the resulting rents to stabilize the
economic and political system

The resulting self-interested political constituencies, in equilibrium, perpetuate the
status quo.
 Economic agents with rational foresight have no incentives to unilaterally
increase investment, as the first-mover will bear short-term costs


While the public sector faces macroeconomic fragility, the domestic private sector
makes enough money within the status quo (and the capital-intensive private sector
is dealing with a low MPK).
Foreign investors “stay out” and non-élite businesses “stay small and informal”.
 Hence, the economic system is in equilibrium at a low-level of capital stock.
 In the short-medium term, low levels of investments are rational, and the “lowcapital-stock” equilibrium is delivering …
 … economic growth, which - although not creating jobs (the unemployment
rate is at almost 8 percent) - seems sustainable.
4. The status quo: a “low-capital-stock equilibrium”
Government
Macroeconomic concerns
and fiscal adjustment
 Low Public Investment
 Under-spending in
infrastructure and education
Regulatory uncertainty,
anticompetitive practices,
and (volatility in)
corruption
A
Enforcement
B
Rules and
regulations
protect
oligopolies
Firms
Incentives:
“Stay small”
“Stay informal”
C
Industry
Segmentation
E
Labor code
Barriers
K-intensive Sectors:
Oligopolies
 Agriculture (rice)
 Transport
 Power & cement
 Mining & banking
Non K-intens. Sectors:
Competition
 Electronics
assembly
D
 Call centers BPOs
Via wages,
rents buy
“national
labor peace”
Households
E
Formal L Mkt
Emigration
Informal L Mkt
F
ABROAD
Domestic labor force (DLF)
25% DLF
Remittances
Source: Author.
G
FDI
5. Concern: Growth could be faster and more inclusive



The economy needs to move from its “low-capital-stock” equilibrium
to a higher one

The growth potential is untapped: for future competitiveness, it is essential to
reverse the present under-investment.

It is difficult to see how, at present levels of investment, a sufficiently robust
growth can be sustained in the longer term, which is essential to deal with the
country’s long-term development challenges (more jobs and less poverty).
Growth is not inclusive

Over 2002-2006, higher growth did not translate into higher employment.

For the past few years, poverty reduction has been slower than in the rest of
East Asia, and rural poverty remains high.
The sustainability of the growth model is exposed to long-term risks

In the long run, of the two engines of growth (export-led services and
remittances-fuelled consumption), the first might “cannibalize” the second.

To reach speedier and more inclusive growth and sustain it in the long term,
the country needs to address its lack of competitiveness.
5. Rent-seeking corporate conglomerates limit economic entry
International Foreign Asset Holdings … and GDP per Capita, 2004
International Investment Assets/GDP
1000
1000
800
700
Average
600
400
EAP Total
Median
Philippines
300
200
100
Ba
ng
lad
In e s
do h
ne
s
Tu i a
n
Ar is ia
m
Pa eni
ra a
gu
Th ay
Ru
a
s s Az e il an
d
ia
n rba
Fe ij a
de n
ra
tio
n
Ch
i
M
al le
ay
s
Ic ia
ela
De nd
nm
Be a rk
lg
i
Ba u m
hr
ai
n
0
International Investment Assets/GDP (%)
900
500
Bahrain
900
Hong Kong
800
700
600
500
Singapore
Brazil
400
Philippines
Argentina
300
China
T hailand
Malaysia
200
Korea
100
Japan
USA
Mexico
0
0
10,000
20,000
30,000
40,000
GDP per Capita, PPP, Current International $
Sources: IMF, Consolidated Portfolio Investment Survey; World Bank, World Development Indicators, 2007.
5. Recent growth is jobless
150
… and poverty reduction is slower
70
101
65
100
100
EAP
50
99
Philippines
(%)
60
98
%
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
0
-50
97
-100
$2-a-day Headcount Index
55
50
45
40
96
35
-150
95
GDP Growth (1980=100)
Employment rate (1980=100 - secondary axis)
-200
30
25
94
Source: Author on NSCB, 2007 and Canlas et al., 2006.
1990 1996 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: Author on World Develop. Indicators , 2007.
6. To sustain growth, the economy needs a phased
competitive diversification and then push reforms

What is needed is a market-driven expansion of non-traditional
products …


Given the strength of rent-seeking interests, moving too abruptly would
entail political risks; the reform can occur only gradually.
To mitigate and postpone confrontation with rent-seekers, the
Government should follow a three-pronged strategy:
a.
b.
c.
start by getting the economic zones right - while pursuing a competitive real
exchange rate - in order to promote new exportables;
increase revenues, to finance the needed boost in infrastructure and
education spending; and
implement gradual reforms to tackle the rent-seeking conglomerate
economy and reduce the cost of strategic inputs.
… to steadily build a pro-reform political constituency


Over time, the expanding competitive sectors should shrink the relative size
of the rent-driven economy, and - with the businesses that are bearing the
costs of rent-seeking - reduce élite-capture.
6a. Pursue better-performing economic zones
and a competitive exchange rate

For speedier growth, policies should promote the manufacturing - and
export - of new and more sophisticated products.

A key starting point is improving the performance of the economic
zones …

How to do it? PEZA should make convincing commitments to improving
the performance of the economic zones:





(i) provide non-fiscal incentives to the construction in loco of first-rate
infrastructure - e.g., via PPP;
(ii) guarantee simplified business procedures;
(iii) enhance in situ competition, by ensuring - for example - that local institutions
treat domestic and foreign firms equally and transparently (e.g., in dispute
reconciliation); and
(iv) coordinate this “ecozones strengthening process” within an overall growth
strategy.
… while pursuing a stable and competitive real exchange rate.

How to do it? Stimulate higher saving rates, by (i) tightening of fiscal policy
and (ii) sterilizing capital inflows and remittances.
6a. Nominal appreciation relative to the US dollar
Asian Pacific Currencies
100=Jun2006
110
KOR
IND
PHIL
THAI
MAL
SYN
TAIW
105
100
95
Philippines
90
85
80
75
Jul/06
Source: Bloomberg
Sep/06
Nov/06
Jan/07
Mar/07
May/07
Jul/07
Sep/07
6b. Increase revenues, to finance spending in
infrastructure and education

Additional revenues and more public-private risk sharing in
infrastructure and education.

How to do it? Increase revenues as a share of GDP by strengthening tax
administration and adjusting excise taxes, continue lowering the debtto-GDP ratio and interest payments, and restrain non-priority current
expenditures.



To increase tax collection, the taxpayer register should include the corporate
conglomerates and tax arrears should be audited.
Indexation would ensure that excise revenues do not decline in real terms:
excises on fuel, alcohol, and tobacco are low by international standards and have
not kept up with inflation since the tax reform of 1997.
Finally, starting from the economic zones, it is necessary to stimulate risksharing among investors - for example, via PPP in infrastructure, by cofinancing public works (transport and communications) and in education, by
addressing under-provision of training in areas where skills are lacking.
6c. Gradually reduce élite-capture, to lower the cost of
strategic inputs

In the traditional sectors, the rent-seekers are powerful and well
established.

How to do it? First steps are improving the investment climate and
competitiveness, and disseminating information on the distributional
effects of government policies. But concrete measures are needed
to open oligopolistic markets.

Reducing protection for agricultural products, particularly rice,
will benefit the food processing and livestock industries.

Greater competition in ports and shipping, civil air transport,
wholesale electricity and cement production markets would
substantially reduce costs, spur investments, and create jobs.

Political reform is needed to trigger and sustain these economic
gains …
 … but leadership matters (as shown in the de-monopolization of
telecoms).
Bibliography













ADB-JBIC-World Bank, 2005. Connecting East Asia: A New Framework for Infrastructure. Asian
Development Bank, Japan Bank for International Cooperation, and World Bank, 2005.
Aquino, R. Q., 2003. “Does Corporate Diversification Create Value?”, The Philippine Review of
Economics, Vol. XL, No. 2, December 2003.
Araral, E. K., 2006. “The Political Economy of Policy Reform in the Philippines: 1992–1998”. The
Journal of Policy Reform Vol. 9, No. 4, 261–274, December 2006.
Arrow, K. J., and L. Hurwicz, 1958. “On the Stability of the Competitive Equilibrium.” Econometrica,
Vol. 26, No. 4. (Oct., 1958), pp. 522-552.
Asian Development Bank, 2007. Asian Development Outlook, 2007.
Ateneo de Manila, 2007. Ateneo Center for Economic Research and Development,
http://www.ateneo.edu/soss/cenfac04.htm
Auty, R.M. and N. Pontara, 2008 (Forthcoming). A dual track strategy for managing Mauritania’s
projected oil rent, Development Policy Review, 26, 1.
Auty, R.M., 2007. Patterns of Rent-extraction and Deployment in Developing Countries: Implications
for Governance, Economic Policy and Performance, In: Mavrotas, G. and Shorrocks, A. (eds)
Advancing Development: Core Themes in Global Economics, London: Palgrave, 555-57.
Balassa, B. (ed.), 1984. Development Strategies in Semi-Industrial Economies. Baltimore: Johns
Hopkins University Press for the World Bank, 1984.
Balisacan, A. and H. Hill, 2007. The Dynamics of Regional Development: The Philippines in East Asia.
Asian Development Bank and Edward Elgar Publishing.
Balisacan, A. and H. Hill, eds. 2003. The Political Economy: Development, Policies, and Challenges.
Loyola Heights, Quezon City: Ateneo De Manila University Press.
Balisacan, A. and N. Fuwa (eds), 2007. Reasserting the Rural Development Agenda: Lessons
Learned and Emerging Challenges in Asia. SEARCA and ISEAS. Manila, Philippines.
Balisacan, A. and N. Fuwa, 2004. “Going Beyond Cross-country Averages: Growth Inequality, and
Poverty Reduction in the Philippines”. World Development 32(11), pp. 1891-1907.
Bibliography (cont.)
















Bernardo, R. L. and M. C. G. Tang, 2007. The Political Economy of Reform during the Ramos
Administration (1992-1998). Draft paper. World Bank Commission on Growth and Development.
Blomström, M. and A. Kokko, 2003. The Economics of Foreign Direct Investment Incentives. NBER
Working Paper No. 9489, February 2003.
Bourguignon F., and T. Verdier, 2000, “Oligarchy, Democracy, Inequality and Growth”, Journal of
Development Economics, 62(2), 285-231.
Brooks, R. 2002. Why is Unemployment High in the Philippines? IMF Working Paper No. 02/23.
Canlas, D. B., Aldaba, F., and E. Esguerra, 2006. Growth, Employment Creation, and Poverty
Reduction in the Philippines. Draft Paper.
Central Bank of the Philippines, 2007. Bangko Sentral ng Pilipinas, http://www.bsp.gov.ph
Dasgupta, P., and Maskin, E., 1986. “The Existence of Equilibrium in Discontinuous Economic Games,
I: Theory”. The Review of Economic Studies, Vol. 53, No. 1. (Jan., 1986), pp. 1-26.
David, C., P. Intal, and R. Balisacan, 2007. Distortions to Agricultural Incentives in the Philippines.
World Bank Working Paper, 2007.
Deininger, K., 2003. Land Policies for Growth and Poverty Reduction. World Bank. Washington D.C.
Devereux, J. and L. L. Chen, 1985. Export Zones and Welfare: Another Look. Oxford Economic
Papers, 47, 4, 2, Oct., 1995, 704-713.
Dooley, M., D. Folkerts-Landau, and P. Garber, 2003. An Essay on the Revived Bretton Woods
System. NBER Working Paper no. 9971.
Esfahani, H. S. 1994. “Regulations, institutions, and economic performance: the political economy of
the Philippines’ Telecommunications Sector”, World Bank Policy Research Working Paper 1294.
Fabella, R. V. 2000. “The Soft State, The Market and Governance.” Philippine Review of Economics,
Volume XXXVIII, No. 1. June.
Ghosh, S., 2006. “East Asian Finance: The Road to Robust Markets.” World Bank, 2006.
Gill, I. and H. Kharas, 2006. An East Asian Renaissance: Ideas for Economic Growth. World Bank,
2006.
Government of The Philippines, 2007. National Statistics Office, http://www.census.gov.ph/
Bibliography (cont.)















Hausmann, R. and D. Rodrik, 2003. “Economic Development as Self-Discovery”, Journal of
Development Economics, vol. 72, December 2003.
Hausmann, R., and D. Rodrik, 2006. Doomed to Choose: Industrial Policy as Predicament, John F.
Kennedy School of Government, Harvard University, September 2006.
Hausmann, R., Pritchett L., and D. Rodrik, 2005. “Growth Accelerations,” Journal of Economic
Growth, Vol. 10, 2005, pp. 303–29.
Hausmann, R., Rodrik D., and A. Velasco, 2005. Growth Diagnostics, John F. Kennedy School of
Government, Harvard University, March 2005.
Hayami, Y., A. Quisimbing, and L. Adriano, 1990. Toward an Alternative Land Reform Paradigm: A
Philippine Perspective. Ateneo de Manila University Press. Manila, Philippines.
Hirschman, A., 1958. The Strategy of Economic Development, New Haven, CT, Yale University
Press.
Hurwicz, L., 1973. “The Design of Mechanisms for Resource Allocation.” American Economic
Review, Vol. 63, No. 2, Papers and Proceedings of the Eighty-fifth Annual Meeting of the American
Economic Association. (May, 1973), pp. 1-30.
Hurwicz, L., 1979. “On allocations attainable through Nash equilibria.” Journal of Economic Theory,
Elsevier, vol. 21(1), pages 140-165, August 1979.
Hutchcroft, P., 1998. Booty Capitalism: The Politics of Banking in the Philippines, Ateneo de Manila
University Press, Quezon City.
IMF, 2005. World Economic Outlook Chapter 2. “When Bubbles Burst.”
IMF, 2006a. Asia and Pacific Regional Outlook. May 2006. Chapter V. “Asia’s Investment Decline.”
IMF, 2006b. IMF Country Report No. 06/181 and Selected Issues Paper, May 2006.
JETRO, 2006. The 16th Survey of Investment-Related Cost Comparison in Major Cities and Regions
in Asia. Japan External Trade Organization, Overseas Research Department. March 2006.
JETRO, 2007. The 17th Survey of Investment-Related Cost Comparison in Major Cities and Regions
in Asia. Japan External Trade Organization, Overseas Research Department. March 2007.
Jones Lang LaSalle, 2006. Asia Pacific Property Digest. Third Quarter 2006.
Bibliography (cont.)














Jones, B. F., and B. A. Olken, 2005. “The Anatomy of Start-Stop Growth,” NBER Working Paper No.
11528, Cambridge, MA: National Bureau of Economic Research, 2005.
Kleinschmidt H., 2006. Migration, Regional Integration and Human Security. The Formation and
Maintenance of Transnational Spaces. Ashgate Publishing.
Krueger A., 1974. “The Political Economy of a Rent-Seeking Society”, American Economic Review,
64(3), 291-303.
Krueger, A., 1993. The Political Economy of Reform in Developing Countries, Cambridge, MA: MIT
Press.
Kumar R. 1987. Performance of foreign and domestic firms in export processing zones. World
Development, Volume 15, Issues 10-11, October-November 1987, Pages 1309-1319.
Maskin, E., 1999. “Nash Equilibrium and Welfare Optimality.” Review of Economic Studies 66 (1), 23–
38.
Maskin, E., and J. Tirole, 1988. “A Theory of Dynamic Oligopoly, I: Overview and Quantity Competition
with Large Fixed Costs.” Econometrica, Vol. 56, No. 3. (May, 1988), pp. 549-569.
Maskin, E., and J. Tirole, 1988. “A Theory of Dynamic Oligopoly, II: Price Competition, Kinked Demand
Curves, and Edgeworth Cycles.” Econometrica, Vol. 56, No. 3. (May, 1988), pp. 571-599.
Maskin, E., and Riley, J., 1984. “Monopoly with Incomplete Information.” The RAND Journal of
Economics, Vol. 15, No. 2. (Summer, 1984), pp. 171-196.
Mirandilla, M. P., 2006. Competition, Regulation and Re-Regulation: Development of
Telecommunications in the Philippines. Draft paper.
Myerson, R. B., 1982. “Optimal coordination mechanisms in generalized principal-agent problems,”
Journal of Mathematical Economics, Elsevier, vol. 10(1), pages 67-81, June.
Myerson, R. B., 1983. “Mechanism Design by an Informed Principal.” Econometrica, Vol. 51, No. 6.
(Nov., 1983), pp. 1767-1797.
Myerson, R. B., 1999. “Nash Equilibrium and the History of Economic Theory.” Journal of Economic
Literature, Vol. 37, No. 3. (Sep., 1999), pp. 1067-1082.
North D. C., 1981. Structure and Change in Economic History, New York: Norton.
Bibliography (cont.)















North D.C., 1990. Institutions, Institutional Change and Economic Performance, Cambridge:
Cambridge University Press.
North, D. C., Wallis J. J., and B. R. Weingast, 2006. A Conceptual Framework for Interpreting
Recorded Human History. NBER Working Paper N. 12795, Cambridge, MA, December 2006.
Prasad, E., R. Rajan, and A. Subramanian, 2007. Foreign Capital and Economic Growth. Brookings
Papers on Economic Activity, Vol. 1, March 2007.
Radner, R., Myerson, R. B., and E. Maskin, 1986. “An Example of a Repeated Partnership Game
with Discounting and with Uniformly Inefficient Equilibria.” The Review of Economic Studies, Vol. 53,
No. 1. (Jan., 1986), pp. 59-69.
Rajan R.G., and L. Zingales, 2003. Saving Capitalism from the Capitalists, Crown Business, New
York.
Rajan R.G., and L. Zingales, 2006. The Persistence of Underdevelopment: Institutions, Human
Capital or Constituencies, CEPR Discussion Paper No. 5867, October 2006.
Republic of The Philippines, 2007. 2007 Philippines Development Forum, www.pdf.ph
Republic of The Philippines, 2007. Bureau of the Treasury, http://www.treasury.gov.ph
Republic of The Philippines, 2007. National Statistical Coordination Board, http://www.nscb.gov.ph
Republic of The Philippines, 2007. Philippine Economic Zone Authority, http://www.peza.gov.ph/
Rodrik, D., 1993. “The positive economics of policy reform”, American Economic Review 83, 356-61.
Rodrik, D., 1996. “Understanding economic policy reform”, Journal of Economic Literature, 34
(March), pp. 9–41.
Rodrik, D., 2006. Industrial Development: Stylized Facts and Policies, John F. Kennedy School of
Government, Harvard University, August 2006.
Rodrik, D., 2007a. “The Real Exchange Rate and Economic Growth: Theory and Evidence,” John F.
Kennedy School of Government, Harvard University, July 2007.
Rodrik, D., 2007b. Normalizing Industrial Policy, John F. Kennedy School of Government, Harvard
University, September 2007.
Bibliography (cont.)














Rondinelli, D. A., 1987. Export Processing Zones and Economic Development in Asia: A Review and
Reassessment of a Means of Promoting Growth and Jobs. American Journal of Economics and
Sociology, 46, 1, Jan. 1987, 89-105.
Shleifer, A. and R. Vishny, 1999, The Grabbing Hand: Government Pathologies and their Cures.
Harvard University Press.
Sturzenegger, F. and M. Tommasi (Eds), 1998. The Political Economy of Reform, Cambridge, MA:
The MIT Press.
Williamson, J., 2003. Exchange Rate Policy and Development. Paper presented to the Institute for
Policy Dialogue, June 2003.
World Bank, 2005a. Philippines: From Short-Term Growth to Sustained Development.
World Bank, 2005b. Philippines: Meeting Infrastructure Challenges.
World Bank, 2005c. Philippines: Towards a Better Investment Climate for Growth and Productivity
World Bank, 2006a. Investing for Growth in Emerging East Asia, Background paper for APEC
Senior Finance Officials Meeting, December 2006.
World Bank, 2006b. East Asia Update. November 2006.
World Bank, 2006c. Dancing with Giants. China, India and the Global Economy. (Eds. L. Alan
Winters and Shahid Yusuf).
World Bank, 2007a. Philippines: Invigorating Growth, Enhancing Its Impact. World Bank,
Washington D.C.
World Bank, 2007b. Agricultural Public Expenditure Review. World Bank, Washington D.C.
World Bank, 2007c. World Development Indicators, 2007.
World Economic Forum, 2004. “The Global Competitiveness Report, 2003-2004”.