Pilipinas Quising

Trade openness and regional development in a developing country

This paper examines how economic openness influences regional development in a developing country, with the Philippines as a case study. It first looks at the disparities in economic and social indicators across the countrys 14 regions and over time. Metro Manila continues to tower over the national economic landscape, although economic dispersal especially in adjacent regions appears to be expanding. The paper then analyzes the determinants of regional development, using five-year panel data. Trade openness appears to be beneficial to regional economic growth and, via growth, poverty reduction. However, it cannot by itself be expected to bring about more balanced regional development.

Did Fiscal Stimulus Lift Developing Asia Out of the Global Crisis? A Preliminary Empirical Investigation

Developing Asia has weathered the global economic crisis well and is experiencing a rapid, robust V-shaped recovery. According to conventional wisdom, the fiscal stimulus packages put in place by the region’s governments played a key role in the region’s superior postcrisis performance. The central objective of this paper is to empirically test this conventional wisdom. To do so, we first examine the state of the precrisis fiscal health in major developing Asian countries, and then explore the size and structure of the fiscal stimulus packages that they implemented. Our empirical analysis centers on assessing the impact of fiscal stimulus on developing Asia’s gross domestic product growth during the crisis. Our main finding is that the stimulus has had a significant positive impact. This suggests that fiscal policy has helped the region cushion the adverse impact of the collapse in global trade. The immediate implication for regional policymakers is that proactive use of countercyclical fiscal policy can limit the slowdown of economic activity arising from severe external shocks. The broader, more fundamental policy implication is that it is in the region’s best self-interest to adhere to its long-standing commitment to fiscal discipline so that it has fiscal space to cope with tail risks.

Macroeconomic Uncertainties, Oil Subsidies, and Fiscal Sustainability in Asia

Global oil prices have subsided relative to the peak reached in mid-2008, but compared to historical levels they remain elevated and volatile as economic uncertainties continue to unfold. The likelihood of these prices rising again soon cannot be ruled out. High oil prices can adversely affect growth, employment, external accounts, and fiscal positions of governments. An overwhelming response across Asia as international oil prices spiked in 2008 was to shield domestic consumers more than before through oil subsidies, which are inequitable, economically inefficient, and environmentally unfriendly. These subsidies add directly to the fiscal deficit and public debt, but are generally hidden, making their measurement difficult. Additionally, in combination with lower growth rates, higher spending to rev up demand across Asia is also worsening the fiscal positions of governments. This paper computes the transmission of recent global oil price movements to domestic markets and estimates oil price subsidies in a diverse group of 32 Asian economies. Using data for 18 of these countries and applying a forward-looking methodology for debt dynamics, the paper then examines the potential impact of responses to macroeconomic shocks and a possible rise in oil prices on public debt and estimates the fiscal correction needed to sustain debt at a steady-state level. Based on the findings from the empirical analysis, the paper extracts some guiding principles for fiscal policy responses to the economic shocks depending on country-specific circumstances.

Where have All the Educated Workers Gone? Services and Wage Inequality in Three Asian Economies

The wage returns to college have risen relative to those to secondary education in many developing economies. In India, the Philippines and Thailand, this is related to the expansion of services employment. We show this using decompositions connecting shifts in the returns to education to changing job opportunities. High‐skill services employment grew slowly while relative demand in the sector shifted from secondary to college graduates, pushing workers with secondary education into low‐skill intensive services. These polarizing trends in services employment account for the growing convexity of the Mincerian wage profile, and may constrain governments seeking to use educational expansion to alter the wage distribution.

Overeducation in Developing Economies: How can we test for it, and what does it mean?

A worker is said to be overeducated if he/she has acquired more education than is required to perform his/her job. In the absence of data measuring the number of years of schooling required to perform particular jobs, we propose a new approach to testing for overeducation. Overeducation is confirmed by rising education levels in jobs that offer very low returns to education and underwent little technological change. We find evidence of overeducation in technologically stagnant unskilled jobs in the Philippines, mild evidence in Mexico, and little evidence in India and Thailand. We show that a job’s mean and modal years of schooling are poor proxies for required education. We also show that overeducation sometimes increases within technologically stagnant unskilled jobs, even while skill biased technological change pulls other workers into jobs offering higher returns to schooling. This may be because the quality of education segments the labor market.

Subsidized Food Distribution with Variable Service Quality: A Revealed Preference Approach

This paper considers quality control in a program that distributes subsidized food. The standard theory of price controls and participatory approaches to food security both suggest that the quality of subsidized food and distribution services may be lower in vulnerable communities. We examine this suggestion in the context of a self-targeted rice subsidy program run by the Philippines National Food Authority (NFA) in 2006. We find that even though NFA rice is demanded more by poorer, less educated and more rice-dependent households, observationally equivalent households in poorer, less educated and more rice-dependent local markets had lower demand for NFA rice. This suggests that needier and less empowered locations received lower quality service. Moreover, we find that these more vulnerable, lower-demand locations were also badly served by several other public services, suggesting that they lack “voice”. These results highlight an important consideration in the debate on whether food security programs should distribute food or cash. The quality of cash distribution services should be easier to control.