Display
External liberalization, growth and distribution in the Philippines
External liberalization has not improved employment, labor productivity and factor income distribution in the Philippines
Authors:
C. C Bautista; J. Y Lim
Publisher:
College of Business Administration, University of the Philippines, 2002
This paper examines the effects of external liberalization on growth and distribution in the Philippines.
It addresses two main issues: (I) the interaction of the timing, length and depth of trade and capital accounts with macro conditions; and (II) how macroeconomic policy was directed and coordinated during the period of the reforms.
The paper analyses the macroeconomic and political history of the Philippines from the post-independence period onwards in relation to movements of key macroeconomic variables. The main period of focus is from 1980 till the present, since this was the period of the reforms.
Decomposition techniques are used to investigate the relationships of the key variables, and the distributional effects of liberalization and deregulation.
The paper states the following:
- Strong external liberalization was accompanied by an increase in the frequency and volatility of boom-bust cycles.
- Between 1988 to 2000, bust periods resulted in displacement of labor, but during the growth periods, there was little labor absorption. Consequently, there was a rise in unemployment.
- The lack of employment absorption in the growth periods was due to: (i) lack of business confidence; (ii) the need to improve labor productivity in the tradable sector due to higher exposure to external competition; (iii) high import dependence that biases against domestic resource and inputs
- Labor absorption was stronger in the service sector in the 1990s. The service sector was relatively insulated from the competitive forces created by the liberalization process.
- There was a shift in labor employment from low-skilled to middle level, and managerial and professional workers. Combined with the fall in wages in the 1990s, this trend has adverse implications for income distribution patterns.
- The frequent boom-bust cycles experienced during the liberalization period did not improve labor productivity, employment generation and factor income distribution.
Summary originally provided by GDNet, an Eldis content partner
