Emmanuel S. de Dios

Governance and Institutional Quality and the Links with Economic Growth and Income Inequality: With Special Reference to Developing Asia

This paper looks at the role of governance and institutions in supporting growth and broadening inclusiveness with special reference to developing Asia. While the intrinsic value of good governance and institutions as ends of development in their own right is now universally accepted and underlies the very notion of inclusiveness, their instrumental value as a means toward better growth performance and more equal income distribution is still not well understood – despite the emergence of a large literature. This paper provides a review of this still growing literature, and, in the process, takes a close look at two critical issues that have attracted a great deal of attention: the measurement of governance and institutional quality, and direction of causality between institutional development and economic development. The paper then examines where developing Asia stands in various widely used measures of governance/institutional quality relative to the rest of the world, and the power of governance indicators in explaining cross-country variations in growth performance and income inequality in the region. The paper argues that given its intrinsic value and positive association with the level of development, good governance should be pursued in all dimensions as a basic development goal. To maximize its instrumental value, the current literature points to the need for recognizing the context-specific nature of the linkages between governance and institutional quality, on one hand, and growth and inequality, on the other, and for focusing on the aspects that are most binding and critical to a country’s development in a particular period. The empirical analysis shows that developing Asian economies with government effectiveness, regulatory quality, and rule of law scoring above the global means (after controlling for per capita income) in 1998 grew faster on average during 1998- 2008 (by 1.6, 2.0, and 1.2 percentage points annually, respectively) than those economies scoring below the global means. On the basis of these findings, the paper argues that improving governance in these dimensions could be used as potential entry points of development strategies for many countries in the region. The paper also highlights the need for more efforts to improve the measurement of governance and institutional quality and more research to better understand the complex relationships between institutional quality and economic development.

Deviant Behavior: A Century of Philippine Industrialization

Recent work has documented industrial output growth around the poor periphery from 1870 to the present, finding unconditional convergence on the leaders long before the modern BRICS and even before the Asian Tigers. The Philippines was very much part of that catching up. In the decade or so up to 1913, Philippine industrial output grew at 6.3 percent per annum, way above that achieved by the industrial leaders. Indeed, the Philippines was the third Asian country to enter the 5% industrial growth club: Japan 1899, China 1900, the Philippines 1913, Taiwan 1914, Korea 1921, and India 1929. The Philippines continued its industrial catch up during the interwar years 1920-1938, as it did during the ISI years 1950-1972. While the Philippines conformed to the world-wide unconditional industrial convergence pattern for seven decades, it began to deviate from the pack in the 1980s, leaving the industrial catching up club in 1982, never to re-enter. What were the causes of this regime switch? Was it political instability at a critical time in the 1980s? Was it a subsequent failure to exploit the move of Japanese manufacturing FDI into the region? Was it an institutional weakness benign in the pre-1982 past but made more powerful since? Was it some liberal policy package that penalized manufacturing when it was already on the ropes? Was it a labor emigration surge in the 1980s that stripped the work force of industrial skills? Was it some massive Dutch Disease created by subsequent huge emigrant remittances? Given the initial political shock, all of these negative forces had their influence in the form of a ‘perfect de-industrializing storm’.

Institutions and governance: Growth and Resilience in an Uncertain Global Economy

The centre of global economic activity is shifting rapidly towards Asia, driven by a combination of the economic dynamism of China, India and other middle-income Asian countries, and sluggish growth in the OECD economies. The rapid growth and rising global prominence has raised a range of major challenges for Asia and for the rest of the world. This comprehensive, forward-looking book examines these issues through in-depth studies of major Asian economies and an analysis of the key development policy options.

Re-reading Menger's table

Abstract Part of the recent reassessment of Mengers thought (e.g. Alter, 1991, 1992; Klausinger, 1992) involves the question whether or not the preferences underlying his well-known table are indeed lexicographic in nature. The answer is rendered complex and the discussion confused, since various classes of lexicographic preferences are possible and have been used by various authors studying Menger. This paper shows some of these representations to be unfounded. Instead, it proposes a class of lexicographic preferences that is closer in spirit to Mengers thinking. It is shown that a partial aspect of the ordering found in Mengers table may also be represented by a real-valued utility function. But textual evidence shows that only a vector-valued representation can adequately capture all of Mengers intent.