Competitiveness, Income Distribution, and Growth in the Philippines: What Does the Long-run Evidence Show?

Felipe, Jesus; Sipin, G ace C. Wo king Pape Compe i i eness, Income Dis ibu ion, and G ow h in he Philippines: Wha Does he Long- un E idence Show? ERD Wo king Pape Se ies, No. 53 P o ided in Coope a ion wi h: Asian De elopmen Bank (ADB), Manila Sugges ed Ci a ion: Felipe, Jesus; Sipin, G ace C. (2004) : Compe i i eness, Income Dis ibu ion, and G ow h in he Philippines: Wha Does he Long- un E idence Show?, ERD Wo king Pape Se ies, No. 53, Asian De elopmen Bank (ADB), Manila, h ps://hdl.handle.ne /11540/1910 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/109262 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen (insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en, gel en abweichend on diesen Nu zungsbedingungen die in de do genann en Lizenz gewäh en Nu zungs ech e. Te ms o use: Documen s in EconS o may be sa ed and copied o you pe sonal and schola ly pu poses. You a e no o copy documen s o public o comme cial pu poses, o exhibi he documen s publicly, o make hem publicly a ailable on he in e ne , o o dis ibu e o o he wise use he documen s in public. I he documen s ha e been made a ailable unde an Open Con en Licence (especially C ea i e Commons Licences), you may exe cise u he usage igh s as speci ied in he indica ed licence. h p://c ea i ecommons.o g/licenses/by/3.0/igo ERD Wo king Pape No. 53 Compe i i eness, Income Dis ibu ion, and G ow h in he Philippines: Wha Does he Long- un E idence Show? JESUS FELIPE AND GRACE C. SIPIN June 2004 Jesus Felipe is an Economis , and G ace C. Sipin an Economics O ice , in he Mac oeconomics and Finance Resea ch Di ision o he Economics and Resea ch Depa men , Asian De elopmen Bank. This pape is pa o he Depa men ’s p og am on “Long-Run G ow h in Asia.” The au ho s a e indeb ed o Andie Mo ales and A a Gail Cas om he Na ional S a is ical Coo dina ion Boa d (NSCB); o Cindy Cas illejos, Gay Co o a on, Jenne h Taja, and Dama L. Ya cia om he Na ional Economic De elopmen Au ho i y (NEDA); and o Caesa B. Co o a on om he Philippine Ins i u e o De elopmen S udies (PIDS), who p o ided he necessa y da a o cons uc he se ies in he pape , and who pa ien ly explained how some o he se ies had been cons uc ed. Con e sa ions wi h colleagues Douglas B ooks, B uno Ca asco, Da e Dole, Emma Fan, Rana Hasan, and Jean-Pie e Ve bies , helped imp o e he a gumen s. Pa icipan s in semina s a he Asian De elopmen Bank, PIDS, NSCB, Fede a ion o Philippine Indus ies, and Thailand De elopmen Resea ch Ins i u e also p o ided in aluable sugges ions. Ra aeli a Aldaba om PIDS p o ided e y de ailed commen s. The usual disclaime applies. Asian De elopmen Bank P.O. Box 789 0980 Manila Philippines ©2004 by Asian De elopmen Bank June 2004 ISSN 1655-5252 The iews exp essed in his pape a e hose o he au ho (s) and do no necessa ily e lec he iews o policies o he Asian De elopmen Bank. FOREWORD The ERD Wo king Pape Se ies is a o um o ongoing and ecen ly comple ed esea ch and policy s udies unde aken in he Asian De elopmen Bank o on i s behal . The Se ies is a quick-dissemina ing, in o mal publica ion mean o s imula e discussion and elici eedback. Pape s published unde his Se ies could subsequen ly be e ised o publica ion as a icles in p o essional jou nals o chap e s in books. CONTENTS Abs ac ii I. INTRODUCTION 1 II. UNIT LABOR COSTS AND INCOME DISTRIBUTION 3 III. COMPETITIVENESS AND DYNAMICS OF INCOME DISTRIBUTION 8 IV. COMPETITIVENESS AND DEGREE OF MONOPOLY 9 V. INCOME DISTRIBUTION AND COMPETITIVENESS IN THE PHILIPPINES 12 A. Labo Sha e 12 B. Uni Labo Cos s 15 VI. DETERMINANTS OF LONG-RUN COMPETITIVENESS AND GROWTH IN THE PHILIPPINES 22 A. Wage Ra e 22 B. P o i Ra e 24 C. Capi al–Ou pu Ra io, Capi al–Labo Ra io, and Labo P oduc i i y 26 VII. DYNAMICS OF INCOME DISTRIBUTION 30 VIII. DEGREE OF MONOPOLY IN THE PHILIPPINES 32 IX. CONCLUSIONS 35 Re e ences 37 ABSTRACT This pape conside s uni labo cos s (ulcs), i.e., he a io o he wage a e o labo p oduc i i y, as he indica o o compe i i eness in he Philippines. I is shown ha ulcs ha e an in e p e a ion om he poin o iew o he unc ional dis ibu ion o income (i.e., he dis ibu ion o ou pu be ween labo and capi al). The pape documen s he dynamics o he labo sha e in na ional income o 1980-2002, and p o ides an analysis o he long- un pe o mance o he Philippine economy. The mos salien ea u es a e: (i) dec easing wage a e (un il he mid-1990s) and labo sha e; (ii) s able p o i a e and inc easing capi al sha e: (iii) s agnan capi al-labo a io; (i ) dec easing capi al p oduc i i y; ( ) dec easing labo p oduc i i y (un il he mid-1990s); and ( i) inc easing ma k- up, he la e in e p e ed as an indica o o he i ms’ capaci y o en o ce a ce ain claim on p o i s agains labo e s and compe i o s, o as an index o he capaci y o i ms o exe an icompe i i e p ac ices. I is a gued ha hese cha ac e is ics indica e ha he coun y is subme ged in a “low-le el equilib ium ap.” This si ua ion has p o ound implica ions o long- un g ow h and o he po en ial g ow h a e o he coun y, and explains he p og essi e de e io a ion o he Philippines du ing he las wo decades, al hough some signs o eco e y can be disce ned. 1ERD WORKING PAPER SERIES NO. 53 I he Philippines canno ge ou o he boom-bus cycle, labou p oduc i i y in he medium and long e m will s agna e and he sha e o hose employed in he o al labou o ce will emain s able, leading o s agna ing employmen oppo uni ies and wo sening income dis ibu ion… . The coun y despe a ely needs adequa ely high sus ained g ow h in ca ching up wi h he pas and in ca ching up wi h he wo ld—especially he pa o he wo ld. Lim and Mon es (2000, 149 and180) I. INTRODUCTION This pape documen s and discusses compe i i eness in he Philippines measu ed in e ms o uni labo cos s (ulcs) o e he long un, 1980-2002. In doing his, he pape un eils he di ec connec ion be ween ulcs and he unc ional dis ibu ion o income, i.e., he dis ibu ion o income be ween he wage bill and o al p o i s, and, as an implica ion, wi h he unde lying a iables ha de e mine long- un capaci y and g ow h: p o i a e, capi al-ou pu a io, capi al-labo a io, and labo p oduc i i y. By explici ly conside ing he unc ional dis ibu ion o income and i s implica ions o g ow h, he discussion has a ce ain classical la o .1 The las wo decades ha e made i pa en ha we li e in a wo ld cha ac e ized by he conjuga ion o h ee ac o s, namely, globaliza ion, apid echnical change, and in ense compe i ion (ADB 2003, 205-272) o he poin ha any analysis o he cu en economic si ua ion s a s wi h a e e ence o globaliza ion, and akes echnical change and compe i i eness as policy-making a iables. The e is an impo an aspec o globaliza ion ha has gi en ise o conce ns. This e e s o he impac o he la e and o he mobili y o capi al on inequali y, in pa icula abou how globaliza ion a ec s bo h capi al and labo . In a wo ld o g ea e economic in eg a ion, s eng hening ade linkages, and unceasing echnological changes, wo ke s a e conce ned abou hei incomes and secu i y in hei wo kplaces. In o he wo ds: wi h globaliza ion in he pic u e, how much ba gaining powe does labo ha e? Wo ke s a e g ea ly exposed o he unce ain ies ha come along wi h globaliza ion, in pa icula he ea o immise iza ion, and he possibili y o unemploymen . The main di e ence be ween he cu en pe iod o globaliza ion and he ea lie ones is ha , be o e, bo h labo and capi al we e equally mobile, while now, inancial capi al is mo e mobile while labo is subs an ially less mobile.2 The e a e wo logical implica ions (Diwan 2001): (i) he bu den sha ing o nega i e shocks be ween labo and capi al is mos likely unequal, 1Fo he classical economis s, accumula ion and p oduc i e in es men o a pa o he social p oduc was he main d i ing o ce behind economic g ow h. In a capi alis sys em, his akes he o m mainly o ein es men o p o i s. The cen al ques ion o he classical economis s was ha o he di ision o ou pu be ween he classes. 2Physical capi al is much less mobile and in es men s ha a e al eady in place canno c edibly h ea en o lee ab oad easily. When we speak o he mobili y o capi al we mean, mos ly hough no only, inancial claims. These a e he ones ha would no be enewed i hei e u ns we e h ea ened o all below in e na ional a es. 2JUNE 2004 COMPETITIVENESS, INCOME DISTRIBUTION, AND GROWTH IN THE PHILIPPINES: WHAT DOES THE LONG-RUN EVIDENCE SHOW? JESUS FELIPE wi h labo bea ing he la ges bu den, since capi al could h ea en o lee unless i ecei es he in e na ional a e o e u n plus a isk p emium; and (ii) in a wo ld wi h highe mobili y o capi al, labo will ha e o compe e ha de o a ac capi al, leading o lowe wages and a “ ace o he bo om.”3 In his sense, his pape is pa o he ecen li e a u e conce ned wi h he e ec s o globaliza ion on labo and he poo (e.g., Diwan 2001 and 2002, Agéno 2002, Ha ison 2002). Fi ms compe e agains each o he by s i ing o emain compe i i e (ADB 2003, Figu e 3.1). Bu wha does his mean? De ining and measu ing compe i i eness is a daun ing ask, especially when used a he na ional le el and o in e na ional compa ison pu poses (ADB 2003, 217-223). A e iew o he li e a u e shows ha he issue has been aken o wo ex emes. Fi s a e hose who ha e o e ed e y comp ehensi e de ini ions o he e m, coupled wi h a he ambi ious a emp s a measu ing i h ough he cons uc ion o “compe i i eness indices”, such as hose o he Wo ld Compe i i eness Repo (Wo ld Economic Fo um 2002) o UNIDO (2002). A he o he side o he spec um, some au ho s ha e a gued ha compe i i eness is a i m-le el issue (in he sense ha i is i ms ha compe e, no na ions) and ha he e m is simply a unny way o saying p oduc i i y (K ugman 1994). As Fage be g (1996) indica es, he p oblem s ems om he ac ha ha he no ion o compe i i eness: (i) is applied a se e al le els (whole economies, sec o s, i ms); (ii) is a ela i e e m in he sense ha wha ma e s is pe o mance ela i e o somebody else’s; and (iii) when applied o a coun y, i has a double meaning, since i ela es o bo h he economic well-being o i s ci izens and o he na ion’s ade pe o mance. Rela ed o he abo e, de eloped coun ies a e conce ned wi h he ole ha ade be ween hem and he de eloping coun ies has played in he de e io a ion o he posi ion o unskilled labo in he de eloped wo ld. While many people see ade be ween de eloped and de eloping coun ies as a sou ce o global g ow h, o he s a e ala med by compe i ion wi h coun ies whe e wage a es a e a ac ion o hose in he de eloped coun ies. The e idence indica es, howe e , ha his line o easoning is a allacy (Golub 1997): impo s om low-wage coun ies ha e played a ela i ely small pa in he de e io a ion o he posi ion o unskilled labo in he de eloped coun ies. The a gumen is used because i is poli ically appealing and con enien , despi e he ac ha he eal easons explaining he posi ion o unskilled labo in de eloped coun ies a e domes ic ac o s. The e is no hing w ong, in p inciple, wi h a guing ha he e m compe i i eness could mean, po en ially, mo e han jus p oduc i i y, exchange a es, o wage a es; and ha i e e s o a b oad assessmen o economic pe o mance, including echnology issues. Bu going beyond his s a emen p o es o be elusi e because “wha else” goes in o he de ini ion o compe i i eness is subjec i e (i.e., i depends on he esea che ), especially i one ies o cons uc a composi e measu e (an index). 3As Diwan (2001) a gues, in a neoclassical wo ld wi h capi al mobili y one would expec ha capi al lows o he egions whe e ulcs a e lowe . The wage a e would inc ease in he capi al-sca ce (poo e ) economy, and p esumably he labo sha e would mo e concomi an ly. Bu a he same ime, he labo sha e would also end o all in socie ies whe e labo is less e icien o s a wi h, since domes ic capi al could mo e elsewhe e in sea ch o highe e u ns. This second a gumen , mo e classical in na u e, unde lies he “ ace o he bo om” a gumen . I i is indeed he dominan one, capi al mobili y would induce a dec ease in wages in socie ies domina ed by en -seeking beha io , like he Philippines. I is pe ec ly possible ha capi al has bene i ed om all he poli ical u moil in he Philippines du ing he las wo decades as well as om he p ocess o globaliza ion. 9ERD WORKING PAPER SERIES NO. 53 dynamic e ms becomes ˆˆˆ ˆˆˆˆ iLL j ijiijj ulc ulc ulc s x s x =−=+−− . And, i as a gued abo e ˆˆ0 LL ij ss≅≅, hen ˆˆˆ i jij ulc x x ≅−. This indica es ha he obse ed changes in ulcs a e essen ially due o di e en ials in he g ow h a es o he espec i e a ios o he PPP o he ma ke exchange a e, mo e han o di e en ials in he g ow h a es o he labo sha es. Uni labo cos s a e ela ed o o he a iables h ough he iden i y (3). This indica es ha mo emen s in he labo sha e will au oma ically be e lec ed in mo emen s in he capi al sha e. Hence, i is wo h explo ing some implica ions o he iden i y in dynamic e ms and elabo a e upon he p e ious discussion. To ally di e en ia ing exp ession (3) wi h a iables exp essed in eal e ms, (/) (/) K nn VA w P L P K w L≡+≡+ , wi h espec o ime yields (subsc ip “ ” deno es ime): ˆ ˆ ˆˆˆ LKLK y sw s s sk≡+++1(5) o ˆ ˆˆ ˆˆ ˆ ˆ [] LKK qy sws sk≡−≡ + + −11 (6) whe e ˆ y is he g ow h a e o eal alue added, ˆ k is he g ow h a e o he capi al s ock, ˆ 1 is he g ow h a e o employmen , ˆ w is he g ow h a e o he eal wage a e, ˆ is he g ow h a e o he eal p o i a e, and L s and K s a e he labo and capi al sha es in ou pu , espec i ely. The e is some hing e y impo an ha ollows om he las exp ession. I can be u he ew i en as: ˆ ˆˆ ˆ ˆ ()[()]0 LK sw q s k y−+ +− ≡ (7) o ˆ ˆˆ ˆ ˆ ()[()] LK sw q s k y−≡− +− (8) This exp ession ope a es as a dynamic cons ain on he economy o being an iden i y. I indica es ha wi h a ising capi al-ou pu a io (( ˆˆ)0 ky−> ), a alling eal p o i a e ( ˆ0 <) is needed o open oom o he eal wage a e o equal o exceed he labo p oduc i i y g ow h a e ( ˆˆ wq≥). The impo an message o he ela ionship is clea : he e is an inescapable link be ween changes in he dis ibu ion o income, compe i i eness, and accumula ion and g ow h. IV. COMPETITIVENESS AND DEGREE OF MONOPOLY In he Kaleckian heo y o p icing, p ices a e se by i ms by applying a ma k-up on cos s.15 In he simples case, his is a ma k-up on ulcs, ha is (La oie 1992, Blecke 1999): 15 Acco ding o Kalecki, eal wages a e no de e mined in he labo ma ke . The le el o he eal wage is beyond he con ol o he wo ke . Gi en a nominal wage (de e mined in he labo ma ke ), he deg ee o monopoly de e mines he p icing policy o i ms. Inc eases in money wages can be usually passed on h ough he ma k-up p ocess as i ms a emp o p ese e eal p o i le els in he ace o money wage ises. SECTION IV COMPETITIVENESS AND DEGREE OF MONOPOLY 10 JUNE 2004 COMPETITIVENESS, INCOME DISTRIBUTION, AND GROWTH IN THE PHILIPPINES: WHAT DOES THE LONG-RUN EVIDENCE SHOW? JESUS FELIPE (1 ) (1 ) / n w PulcVA L µµ =+ =+ (9) whe e 01 µ << is he pe cen age ma k-up. I co e s he i m’s ixed cos s and p o i is cons ained by he le el o compe i ion acing he i m and by he balance o poli ical and economic powe be ween social classes; ce e is pa ibus, mo e compe i ion leads o lowe alues o m as does a shi in he balance o powe owa ds wo ke s. Exp ession (9) can be ew i en as: 1 1 L n n wL s VA µ == +(10) F om he e i ollows ha : 1 K s µ µ =+(11) and 1 KK KL ss ss µ == −(12) Kalecki e e ed o he capi al sha e (sK) as he “deg ee o monopoly” o he economy because i can be w i en as a unc ion o he ma k-up (m), he a io o ac o sha es, in e p e ed as an indica o o he i ms’ capaci y o en o ce a ce ain claim on p o i s agains labo e s and compe i o s. This can also be indi ec ly in e p e ed as an index o he capaci y o i ms o impose an icompe i i e p ac ices. As can be seen om equa ion (11), he highe he ma k-up he highe he capi al sha e; and ice- e sa, he highe he la e he highe he o me (equa ion [12]).16 Upon subs i u ion o he labo sha e in e ms o he ma k-up (equa ion [10]) in o he ulc exp ession we ob ain: 1 1 n n w L PPP ulc x VA ER µ    ==    +    (13) which indica es ha , ce e is pa ibus, as he ma k-up inc eases he ulc dec eases. I does become somewha pa adoxical ha as he ma k-up pe cen age inc eases, ypical o a less compe i i e economy 16 No ice ha changes in he ma k-up ha al e he dis ibu ion o income a ec he p o i a e / K≡Π (see equa ion (3)), whe e / nPΠ=Π , since he la e can be w i en as (/)(/) (/) K VAVAK sVAK≡Π ≡ , ha is, as he p oduc o he capi al sha e imes capi al p oduc i i y ( / VA K ), o in e ms o he ma k-up as (/)[(/(1 )](/) K sVAK VAK µµ ≡=+ . 11ERD WORKING PAPER SERIES NO. 53 in he mic oeconomics e minology, he economy becomes mo e compe i i e unde his iew. This indica es ha coun ies wi h lowe ma k-ups, indica ing mo e compe i i e p ac ices, will ha e highe ulcs. Bu hese a e he coun ies ha will, mo e likely, g ow as e . Pe haps his p o ides an answe o Kaldo ’s pa adox. Inc eases (dec eases) in he ma k-up (and hence in he p o i sha e o income) ha e compe ing e ec s on agg ega e demand: consump ion dec eases (inc eases) while in es men inc eases (dec eases) a he same ime ha supply inc eases (dec eases).17 In a con ex whe e wo ke s and i ms s uggle o e he dis ibu ion o income, i is di icul o achie e balanced g ow h as demand may all when supply inc eases. The linkage be ween ma k-up, dis ibu ion o income, and demand ia consump ion is as ollows: as he ma k-up inc eases, capi alis s ha e a la ge sha e o income ia equa ion (11) while wo ke s ha e a lowe sha e; and because wo ke s spend mo e and capi alis s less on he ma gin, he o e all ma ginal p opensi y o consume o he economy declines, implying ha o e all consump ion declines. The dynamics o hese a iables is de e mined by changes in he compe i i e en i onmen and shi s in he balance o powe be ween social classes. The e is a u he issue wo h discussing in connec ion wi h Kalecki’s p ice equa ion. Equa ion (9) can be w i en in g ow h a es as: ˆˆˆ ˆn Pwq τ =+ − (14) whe e 1 τ µ =+ and q deno es labo p oduc i i y ( / VA L). An implica ion o equa ion (14) is ha in la iona y p ocesses a e he consequence o he s uggle o e he sha es in na ional income. The a e o wage in la ion ela i e o p oduc i i y (along wi h p ices o impo s and aw ma e ials) is aken o be he mos impo an de e minan o p ice in la ion. The s uggle be ween capi al and labo is exp essed in he wage and p ice se ing p ocesses, he o me used by labo , and he la e by i ms, o in luence hei espec i e sha es. The powe o labo o in luence nominal wages and he powe o i ms o pass on wage inc eases ia he ma k-up in he o m o highe p ices join ly cause in la ion, wi h he mone a y expansion me ely allowing, and no causing, he exp ession o he con lic be ween he wo classes. Suppose wo ke s manage o achie e inc eases in nominal wages abo e inc eases in labo p oduc i i y ( ˆˆ n wq>), as has been he case o he Philippines du ing 1980-2002. The impo an ques ion is he deg ee o which his inc ease can be passed on o p ices ia changes in he ma k- up. I he di e en ial ˆˆ ()0 n wq−> is passed on o p ices exac ly, hen ˆ0 τ = and ˆˆˆ () n Pwq=− . On he o he hand, i i ms decide o ake ad an age o he si ua ion and inc ease hei ma k-up, hen ˆ0 τ > and ˆˆˆ () n Pwq>− . And inally, i i ms decide o cu hei ma k-up, hen ˆ0 τ < and ˆˆˆ () n Pwq<− . In he i s case, since he ma k-up does no change, he dis ibu ion o income will emain unchanged. In he second case, he dis ibu ion o income shi s in a o o capi al and he ulc will decline (a mo e compe i i e economy!). This will lead o an inc ease in in es men in he ini ial 17 This co esponds o a consump ion unc ion sepa a ing wo ke s and capi alis s income, each o hem wi h a di e en ma ginal p opensi y o consume (mpc), ha is, LK K (s VA) mpc (s VA) L Campc=+ + , whe e i is assumed ha L mpc >K mpc . 18 Coun ies y o o e come unde consump ion c ises wi h measu es such as he es uc u ing o p oduc ion owa d luxu y consump ion goods, mo e likely o be pu chased ou o inc eased p o i income, o p omo ing expo s. SECTION IV COMPETITIVENESS AND DEGREE OF MONOPOLY 12 JUNE 2004 COMPETITIVENESS, INCOME DISTRIBUTION, AND GROWTH IN THE PHILIPPINES: WHAT DOES THE LONG-RUN EVIDENCE SHOW? JESUS FELIPE s ages. Howe e , a p o ac ed shi in he dis ibu ion o income owa d capi al will induce a decline in consump ion. Soone o la e he e will be a misma ch be ween supply and demand since he inc ease in capaci y due o he inc ease in in es men will no be accompanied by an inc ease in consump ion demand. This is a p oblem o lack o demand, an unde consump ion c isis. Capaci y u iliza ion will ha e o decline; hen in es men will be educed, as will be income, p oduc ion and employmen .18 Finally, in he hi d case, he dis ibu ion o income will shi owa d labo . As a esul , agg ega e demand is a ec ed h ough a decline in in es men and an inc ease in consump ion, and agg ega e supply declines o g ows a a slowe pace. I is impo an o no e ha i he change in consump ion is small o akes place slowly, hen a p o i abili y c isis eme ges and unemploymen will mos likely de elop. I is possible ha he changes in consump ion and in es men cancel ou bu his would be a luke. In gene al, in es men esponds mo e quickly and sha ply o hese e en s han consump ion, al hough i is possible ha delayed changes in he dis ibu ion o income may esul in (posi i e) changes in consump ion ha domina e he dec ease in in es men , hus a oiding he p oblem.19 V. INCOME DISTRIBUTION AND COMPETITIVENESS IN THE PHILIPPINES This sec ion documen s and analyzes he dynamics o he labo sha e and ulcs in he Philippines du ing 1980-2002, and discusses hei de e minan s in e ms o he a iables ha unde lie long- un g ow h and de elopmen , namely, labo p oduc i i y, capi al-labo a io, p o i a e, and he capaci y o he economy o gene a e o mal employmen .20 A. Labo Sha e Figu e 1 shows he aw labo sha e o he Philippines, cons uc ed as he a io o o al labo compensa ion o GDP a ac o cos as eco ded by he NIPA. This is a se ies wi h a mean o 0.254, a maximum alue o 0.283, and a minimum alue o 0.223. The se ies shows a sligh inc easing end. As Indica ed by Gollin (2002), his se ies is mos likely inco ec o i does no conside he ac ha an impo an pa o labo income in de eloping coun ies is egis e ed unde he ope a ing su plus ( o al p o i s) as p i a e uninco po a ed en e p ises (OSPUE). The sha e o OSPUE, also shown in Figu e 1, ep esen s la gely income (a mix o wages an p o i s) o he sel -employed, 19 No ice ha a ac o ha a ec s di ec ly he ma k-up is he le el o in e na ional compe i ion. I is possible o concei e an en i onmen whe e, due o he in ensi ica ion o in e na ional compe i ion, wage inc eases a e e y small combined wi h inc eases in labo p oduc i i y (e.g., ˆˆ n wq< ), e y small inc eases in he ma k-up ( ˆ0 τ ≥), and possibly declines in p ices ( ˆ0P<). This is much o wha is happening in ecen yea s in many coun ies. 20 This sec ion complemen s he s uc u alis analyses o he Philippines o Lim (1999) and Lim and Mon es (2000), in e alia, who loca e he p oblem o he Philippines in he lack o sus ained g ow h due o he boom-bus cycles o g ow h and ecessions since he ea ly 1980s. As Lim and Mon es (2000) documen , Philippine adjus men du ing he las 20 yea s has ollowed he s anda d app oach o sha p de alua ions and mone a y es ic ions, and he coun y expe ienced he s anda d consequences o in la ion and declines in in es men . Du ing he eco e y pe iods, he go e nmen in oduced signi ican s uc u al adjus men measu es, such as ax e o ms, impo libe aliza ion, and p i a iza ion o he go e nmen co po a e sec o . All his has had a olle -coas e impac on employmen , and appea s o ha e a pe manen e ec in e ms o he long- e m de elopmen ambi ions o he coun y. A e y good in oduc ion o he p oblems o he Philippine economy is p o ided by Balisacan and Hill (2003). 13ERD WORKING PAPER SERIES NO. 53 21 I is di icul o de ine he in o mal o shadow economy. One common de ini ion is as ollows: “all economic ac i i ies ha con ibu e o he o icially calcula ed (o obse ed) g oss na ional p oduc bu a e cu en ly un egis e ed.” Ano he de ini ion is: “ma ke based p oduc ion o goods and se ices, whe he legal o illegal, ha escapes de ec ion in he o icial es ima es o GDP” (Schneide and Ens e 2000, 78). Also see de So o (1989). In he Philippines, he NIPA include es ima es o un epo ed income om sel -employmen ; legal unde g ound ac i i ies; and illegal ac i i ies such as d ugs, p os i u ion, smuggling, e c. 22 In e ms o he a iables ha de ine he labo sha e (nominal wage a e (wn), employmen (L), and nominal ou pu (VAn), he eason why i has declined is ha he nominal wage a e has inc eased a a subs an ially lowe a e han nominal ou pu pe wo ke (VAn/L). 23 Fo a ecen ea men o unemploymen in Asia see Mazumda (1999). 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 0.2 0.3 0.4 0.5 0.6 Sha e o Ope a ing Su plus Raw Labo Sha e Yea s FIGURE 1: OPERATING SURPLUS AND RAW LABOR SHARE and in he Philippines, i also con ains an es ima e o he in o mal sec o .21 The sha e o OSPUE has declined om 0.516 in 1980 (in 1980 he sha e o OSPUE was wice as la ge as ha o he compensa ion o employees) o 0.383 in 1999, and since hen i has eco e ed.22 Mos o he decline in OSPUE (which pa ly e lec s he educ ion in ag icul u al income) has a mi o image in he inc ease in he sha e o go e nmen co po a ions (a componen o capi al’s ope a ing su plus), whose sha e in ou pu doubled be ween 1980 and 1999 (since hen i has declined). The a io o compensa ion o employees o ou pu dec eased du ing he poli ical c ises o he ea ly 1980s and ea ly 1990s (a e which i eco e ed), and a e he Eas Asian inancial c isis o 1997-1998 (bu no in 1997 o 1998). On he o he hand, sel -employed wo ke s and wo ke s in he in o mal sec o ha e no ba gaining powe o nego ia e hei wages. Mos likely, many o hese wo ke s a e mig an s om he ag icul u al sec o o he u ban a eas, and many o hem canno make i in o he o mal sec o in he ci ies and end up being sel -employed. This g oup, which comp ises s ee endo s, maids, and d i e s, is much mo e ulne able o shocks and hey a e cons an ly o ced o accep lowe and lowe ( eal) incomes.23 SECTION V INCOME DISTRIBUTION AND COMPETITIVENESS IN THE PHILIPPINES 14 JUNE 2004 COMPETITIVENESS, INCOME DISTRIBUTION, AND GROWTH IN THE PHILIPPINES: WHAT DOES THE LONG-RUN EVIDENCE SHOW? JESUS FELIPE 0.60 0.65 0.70 0.75 0.80 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 Yea s FIGURE 2: ADJUSTED LABOR SHARE I he sha e o OSPUE is mis akenly coun ed as pa o p o i s, i will end o sys ema ically unde es ima e he labo sha e in de eloping coun ies. The e a e di e en ways o ying o ake his in o accoun so as o adjus he o iginal a io o compensa ion o GDP. He e, adjus men s 1 and 2 in Gollin (2002) a e applied and hen he a e age is aken.24 This esul s in he adjus ed labo sha e, shown in Figu e 2, which has a mean o 0.687, a maximum alue o 0.777, and a minimum alue o 0.628. Wha is impo an o no ice now is ha he se ies displays a clea dec easing end, es ima ed o be a ound -0.6 pe cen age poin s pe annum (Table 1). I is pe haps wo h men ioning ha he Eas Asian inancial c isis does no seem o ha e had any especially nega i e e ec on he labo sha e. This declined be ween 1998 and 1999, bu hen i eco e ed. The labo sha e has declined in he Philippines because al hough he o al wage bill has inc eased du ing he pe iod conside ed, nominal ou pu has inc eased as e . 24 Adjus men 1 is calcula ed as he a io o he sum o he sha es in GDP o compensa ion o employees plus he sha e o OSPUE o one minus he sha e in GDP o indi ec axes and subsidies. This adjus men ea s all OSPUE as labo income. I leads o a labo sha e ha declines om 0.84 o 0.77. Adjus men 2 is calcula ed as he a io o he sha e o compensa ion o employees in GDP o one minus he sha e o OSPUE and minus he sha e o indi ec axes and subsidies. This adjus men ea s OSPUE as comp ising he same mix o labo and p o i s as he o e all economy. This adjus men leads o a labo sha e ha declines om 0.64 o 0.54. I is ob ious ha his, o any o he p ocedu e in ol es an elemen o subjec i i y gi en he issue a hand. I is no claimed ha his newly calcula ed sha e is absolu ely co ec . I is impossible o know. Howe e , i seems much mo e easonable han he o iginal one es ima ed by simply di iding labo compensa ion by GDP as epo ed by he NIPA. 15ERD WORKING PAPER SERIES NO. 53 TABLE 1: TREND OF THE ADJUSTED LABOR SHARE (SL) DEPENDENT VARIABLE sL sLGROWTH OF sLLOG OF sL Pe iod 1980-2002 1981-2002 1981-2002 1980-2002 Cons an 0.758 0.755 -0.275 (87.32) (47.23) (-22.31) Time T end -0.0059 -0.0058 -0.053 -0.0085 (-9.32) (-5.28) (-0.80) (-9.45) LS3PH(-1) 0.390 (1.65) R20.805 0.820 0 0.809 Du bin-Wa son 1.18 1.62 2.29 1.18 25 PPPs a e aken om he Wo ld De elopmen Indica o s o he Wo ld Bank. As somebody poin ed ou in a p esen a ion, he exchange a e used o he PRC is he ma ke alue, no he much highe a e quo ed in he black ma ke . I he la e we e used, he a io x o he PRC would be much lowe . B. Uni Labo Cos s Using equa ion (2) he ulc o he Philippines is cons uc ed and shown in Figu e 3. Howe e , as indica ed abo e, o p ac ical pu poses wha ma e s is he ulc so ha wo coun ies can be compa ed. Young (2000, 38-41 and Table XXIII) p o ides he labo sha e o he PRC and co ec ly a gues ha due o he low impo ance o sel -employmen in he coun y, he labo sha e needs no adjus men . Con a y o he Philippines, he PRC’s labo sha e has been cons an a a ound 0.60 o he 15 yea s o which Young p o ides da a (1980-1995). On he o he hand, un il 1990, he yuan’s x ( he a io o PPP o he ma ke exchange a e) was highe han ha o he Philippine peso (0.662 e sus 0.287 in 1980; and 0.245 e sus 0.229 in 1990), which indica ed ha he o me was subs an ially less unde alued.25 Bu since 1991, he deg ee o unde alua ion o he yuan has been sligh ly highe han ha o he peso (a ound 0.2 o he PRC and 0.25 o he Philippines). Figu e 3 also shows he ulc o he PRC, and indica es ha un il 1989 he Philippines had a lowe ulc, bu gi en ha i had a highe labo sha e, he lowe ulc was he esul o he ac ha i had a subs an ially lowe x a io. Ne e heless, he PRC was closing he gap e y as and since 1990 i has had a lowe ulc han he Philippines. Gi en hese wo pa hs, he ulc o he Philippines is-à- is he PRC (i.e., he a io wi h he Philippines in he nume a o ) displays an inc easing end (a ailable upon eques ) du ing he whole pe iod o analysis, indica ing ha al hough he Philippines was mo e compe i i e in absolu e e ms un il 1989, i has unde gone a g adual loss o compe i i eness is-à- is he PRC. No es: -s a is ics in pa en hesis. In he inal eg ession (in loga i hms) a end a e o –0.85 pe cen is equi alen o a decline o a ound –0.6 pe cen age poin s pe annum, gi en ha he mean alue o he labo sha e is a ound 0.7. The Dickey-Fulle es o a uni oo does no ejec he null hypo hesis o a uni oo , al hough he - es o he ele an a iable is e y high and is no a o m he ejec ion alue. In o he wo ds, he a iable could be end-s a iona y. SECTION V INCOME DISTRIBUTION AND COMPETITIVENESS IN THE PHILIPPINES 16 JUNE 2004 COMPETITIVENESS, INCOME DISTRIBUTION, AND GROWTH IN THE PHILIPPINES: WHAT DOES THE LONG-RUN EVIDENCE SHOW? JESUS FELIPE I is in e es ing o no e, howe e , ha he pa h o he ulc o he Philippines is comple ely di e en when calcula ed in e ms o equa ion (1) (a ailable upon eques ). In his case, i is an upwa d s aigh line, wi h a alue o 0.12 in 1980 and o 1.08 in 2002. Wha is in e es ing is ha gi en ha he labo sha e has declined, he inc ease in his ulc mus o be a ibu ed en i ely o he inc ease in he GDP de la o . This indica es ha he cons uc ion and in e p e a ion o ulcs is ex emely sensi i e o he ype o “p ice adjus men ” used. The no ion o ulc as he p oduc o he labo sha e imes a p ice adjus men ac o is alid a any le el o agg ega ion as he accoun ing iden i y (3) mus hold oo. UNIDO p o ides wage a es and labo p oduc i i y da a.26 The a io o hese wo se ies is he labo sha e. These da a a e p o ided in Table 2. They show e y low labo sha es, e en o he US, and hus one has o ques ion hese da a. Table 3 shows x , he a io o PPP o ma ke exchange a e. These da a con i m he ea lie claim ha PPP exchange a es a e close o he ma ke exchange a es in he mo e de eloped coun ies (Hong Kong, China; Singapo e; US), bu hey a e subs an ially lowe in de eloping coun ies. Mo eo e , i is in e es ing o no e ha o mos coun ies in his la e g oup, he a io has dec eased, indica ing ha he cu encies ha e become mo e unde alued. Table 4 shows he annual wage a es exp essed in US dolla s, and Table 5 shows labo p oduc i i y wi h alue added exp essed in PPP e ms. Finally, he ulc is calcula ed by mul iplying he labo sha e imes he PPP a io o he ma ke exchange a e (o by di iding he wage a e in US dolla s by labo p oduc i i y in PPP e ms). Resul s a e p o ided in Table 6. Analyzing hese da a is s aigh o wa d in e ms o mains eam analysis: he lowe he igu es, he mo e compe i i e he economy is, and hus he as e i should g ow. The ques ion, as has been a gued h oughou he pape , is whe he unde he concep ualiza ion o ulcs as labo sha es, his in e p e a ion emains alid, i.e., do declining labo sha es imply mo e compe i i e economies (in he sense o economies ha g ow as e )?27 26 O iginal da a a e om collec ed a ailable da a om UNIDO’s (2003) Indus ial S a is ics Da abase. 27 Golub (1997, Figu e 1; o iginal calcula ions a e in Golub 1995) indica es ha he ulc o he Philippines o 1990 was almos 1.2 imes ha o he Uni ed S a es. This is di icul o belie e. No e ha Golub (1995, 14, equa ion [4]) cons uc ed he ulc wi h espec o he US by mul iplying he a io o labo p oduc i i ies by ha o he wage a es (and hen adjus ing by PPP and he ma ke exchange a e). The discussion ollowing equa ion (4) in his pape indica es ha he ook he se ies om di e en sou ces, which migh lead o inconsis encies and compa abili y p oblems. 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 0.10 0.20 0.30 0.35 0.40 0.25 0.15 PRC PHIL Yea s FIGURE 3: UNIT LABOR COSTS: THE PRC AND THE PHILIPPINES 17ERD WORKING PAPER SERIES NO. 53 TABLE 2: LABOR SHARES MANUFACTURING INDUSTRY Yea Uni ed Thailand Taipei,China S i Lanka Singapo e Philippines Papua Pakis an Nepal S a es New Guinea 1980 0.409 na na 0.257 0.297 0.220 0.374 0.209 na 1981 0.408 na 0.369 0.242 0.303 0.246 0.334 0.196 na 1982 0.414 0.196 0.383 0.194 0.350 0.331 0.374 0.206 na 1983 0.401 na 0.379 0.179 0.369 0.209 0.373 0.204 na 1984 0.391 0.219 0.395 0.112 0.365 0.205 0.329 0.203 na 1985 0.397 na 0.403 0.122 0.378 0.226 0.336 0.202 na 1986 0.388 na 0.390 0.115 0.317 0.208 0.364 0.220 0.220 1987 0.368 na 0.395 0.091 0.289 0.243 0.369 0.213 0.250 1988 0.360 0.170 0.422 0.098 0.282 0.253 0.356 0.214 0.262 1989 0.354 0.141 0.448 0.104 0.304 0.267 0.356 0.222 0.243 1990 0.356 0.156 0.451 0.092 0.318 0.226 na 0.230 0.233 1991 0.355 0.071 0.439 0.097 0.326 0.232 na 0.239 0.245 1992 0.347 na 0.461 0.091 0.337 0.230 na na na 1993 0.339 0.181 0.463 0.143 0.318 0.202 na na 0.230 1994 0.327 0.200 0.486 0.155 0.314 0.205 na na 0.204 1995 0.318 na 0.482 0.143 0.306 0.183 na na na 1996 na na 0.456 0.142 0.306 0.168 na 0.196 0.185 1997 na na na na 0.303 0.165 na na na 1998 na na na na 0.304 na na na na 1999 na na na na 0.249 na na na na 2000 na na na na 0.229 na na na na Yea Mongolia Malaysia Ko ea Indonesia India Hong Kong, Fiji PRC Bangladesh China 1980 na 0.280 0.293 0.211 0.507 0.520 0.430 0.151 0.313 1981 na 0.307 0.268 0.210 0.479 0.515 0.484 0.154 0.340 1982 na 0.321 0.275 0.252 0.486 0.516 0.470 0.154 0.322 1983 na 0.300 0.263 0.271 0.481 0.483 0.551 0.159 0.287 1984 na 0.285 0.263 0.240 0.503 0.590 0.557 0.154 0.269 1985 na 0.299 0.271 0.237 0.481 0.632 0.586 0.146 0.299 1986 na 0.299 0.262 0.227 0.494 0.595 0.464 0.161 0.296 1987 na 0.291 0.272 0.214 0.487 0.566 0.413 na 0.315 1988 na 0.272 0.284 0.225 0.434 0.554 0.479 na 0.340 1989 0.282 0.259 0.307 0.204 0.409 0.550 0.434 na 0.315 1990 0.266 0.272 0.276 0.131 0.388 0.549 0.475 na 0.340 1991 0.157 0.270 0.263 0.143 0.394 0.525 0.483 na 0.319 1992 0.243 0.280 0.263 0.141 0.392 0.508 0.469 na 0.392 1993 0.264 0.279 0.266 0.145 0.334 0.518 na na 0.367 1994 0.240 0.275 0.253 0.130 0.315 0.511 na na 0.355 1995 na 0.276 0.237 0.203 0.316 0.522 na na na 1996 na 0.268 0.242 0.176 0.322 0.507 na na na 1997 na 0.259 0.229 na 0.336 0.512 na na 0.215 1998 na na 0.196 0.150 0.243 0.522 na na na 1999 na 0.244 0.194 0.156 0.238 0.508 na na 0.201 2000 na na 0.192 0.150 0.238 0.473 na na na Sou ce: UNIDO. Calcula ed as he a io o he wage a e o labo p oduc i i y. SECTION V INCOME DISTRIBUTION AND COMPETITIVENESS IN THE PHILIPPINES 18 JUNE 2004 COMPETITIVENESS, INCOME DISTRIBUTION, AND GROWTH IN THE PHILIPPINES: WHAT DOES THE LONG-RUN EVIDENCE SHOW? JESUS FELIPE TABLE 3: RATIO PPP/MARKET EXCHANGE RATE Yea Uni ed Thailand S i Lanka Singapo e Philippines Papua Pakis an Nepal Mongolia S a es New Guinea 1980 0.9372 0.4693 0.2569 0.8204 0.2737 0.6739 0.4258 0.2757 na 1981 0.9714 0.4481 0.2485 0.8375 0.2746 0.6201 0.4440 0.2734 na 1982 1.0235 0.4398 0.2619 0.8585 0.2696 0.5673 0.3989 0.2742 na 1983 1.0615 0.4646 0.2696 0.9355 0.2383 0.5978 0.3818 0.2835 na 1984 1.0563 0.4349 0.2790 0.9087 0.2281 0.5837 0.3726 0.2565 na 1985 1.0380 0.3668 0.2568 0.8440 0.2302 0.5053 0.3267 0.2453 na 1986 0.9862 0.3602 0.2475 0.7763 0.2045 0.4993 0.3018 0.2261 na 1987 0.9358 0.3530 0.2316 0.7216 0.1995 0.5171 0.2754 0.2277 na 1988 0.9157 0.3568 0.2217 0.7581 0.2016 0.5516 0.2731 0.2238 na 1989 0.9535 0.3791 0.2155 0.8396 0.2156 0.5509 0.2636 0.2157 na 1990 0.9833 0.4002 0.2318 0.9414 0.2179 0.5122 0.2631 0.2199 na 1991 0.9951 0.4130 0.2424 0.9910 0.2214 0.5396 0.2643 0.1849 0.5599 1992 0.9790 0.4149 0.2418 1.0428 0.2512 0.5082 0.2660 0.1855 0.3401 1993 0.9823 0.4238 0.2383 1.0381 0.2481 0.4809 0.2527 0.1771 na 1994 0.9849 0.4428 0.2507 1.1304 0.2774 0.4881 0.2572 0.1839 0.2032 1995 0.9798 0.4565 0.2569 1.2171 0.2975 0.4274 0.2743 0.1807 0.2649 1996 0.9876 0.4598 0.2602 1.2303 0.3150 0.4409 0.2579 0.1752 0.2861 1997 1.0094 0.3863 0.2675 1.2128 0.2982 0.4338 0.2564 0.1847 0.2376 1998 1.0358 0.3203 0.2694 1.0792 0.2432 0.3509 0.2523 0.1710 0.2521 1999 1.0324 0.3302 0.2491 1.0164 0.2697 0.3106 0.2406 0.1780 0.2199 2000 1.0234 0.3142 0.2386 0.9830 0.2490 0.3243 0.2229 0.1747 0.2267 Yea Malaysia Ko ea Indonesia India Hong Kong, Fiji PRC Bangladesh China 1980 0.7529 0.5373 0.6047 0.3999 0.8149 0.7406 0.6619 0.3693 1981 0.6810 0.5316 0.6325 0.3784 0.7559 0.6814 0.5603 0.3173 1982 0.6700 0.5242 0.6205 0.3651 0.7522 0.6741 0.4944 0.2713 1983 0.7042 0.5288 0.5255 0.3740 0.6603 0.6692 0.4854 0.2651 1984 0.6979 0.5098 0.4706 0.3426 0.6421 0.6157 0.4133 0.2821 1985 0.6160 0.4669 0.4349 0.3231 0.6492 0.5881 0.3448 0.2701 1986 0.5104 0.4551 0.3537 0.3171 0.6300 0.5850 0.2877 0.2557 1987 0.5063 0.4749 0.2901 0.3045 0.6268 0.5249 0.2568 0.2549 1988 0.4762 0.5406 0.3010 0.2869 0.6431 0.4544 0.2714 0.2507 1989 0.4872 0.6346 0.3202 0.2694 0.7327 0.4567 0.2963 0.2698 1990 0.5104 0.6636 0.3289 0.2733 0.7838 0.4933 0.2450 0.2627 1991 0.5031 0.6924 0.3306 0.2340 0.8371 0.5281 0.2290 0.2582 1992 0.5347 0.6746 0.3224 0.2151 0.8890 0.5206 0.2295 0.2410 1993 0.5437 0.6903 0.3378 0.1971 0.9623 0.5098 0.2465 0.2340 1994 0.5444 0.7293 0.3494 0.2058 1.0084 0.5310 0.1938 0.2350 1995 0.5735 0.7872 0.3558 0.2100 1.0084 0.5374 0.2159 0.2439 1996 0.5859 0.7753 0.3690 0.2045 1.0369 0.5642 0.2278 0.2370 1997 0.5400 0.6774 0.3347 0.2142 1.1081 0.5691 0.2317 0.2385 1998 0.4244 0.4808 0.1670 0.2051 1.1386 0.4327 0.2270 0.2369 1999 0.4293 0.5458 0.2360 0.1990 1.0576 0.4275 0.2171 0.2315 2000 0.4249 0.5565 0.2393 0.1940 0.9513 0.3946 0.2152 0.2166 Sou ce: Wo ld De elopmen Indica o s. 25ERD WORKING PAPER SERIES NO. 53 businesses’ u u e p o i expec a ions as plans o he u u e a e o some ex en shaped by he cu en ou come o nea pas expendi u es. Rising p o i s signal heal hy economic condi ions, which a e likely o make i ms adop a mo e op imis ic s ance and hus p oceed wi h hei in es men plans. The opposi e holds i p o i s a e alling. The e o e, planned in es men g ow h is in luenced by he dynamics o p o i s ela i e o ecen in es men s. This is he no ion o inc emen al p o i - a e. Expec a ions o u u e e u ns a e sensi i e o he e olu ion o p o i s in ela ion o pas ecen in es men s. The dynamics o he inc emen al p o i - a e p o ides an indica ion o he mo emen o he a e age p o i a e and leads u u e expec a ions d i ing in es men g ow h. Figu e 6 shows he a e age eal p o i a e and he inc emen al p o i a e o he Philippines.36 The mos no iceable ea u e o he a e age p o i a e is i s ela i e cons ancy du ing he pe iod s udied. The a e age p o i a e o he pe iod is 11.21 pe cen , wi h a maximum alue o 13.03 pe cen (1996), and a minimum o 8.37 pe cen (1985). In ac , he se ies only shows a s eady decline, om a ound 11 pe cen o 8.3 pe cen , be ween 1980-1985, coinciding wi h he poli ical and economic c isis. I is in e es ing ha in a coun y wi h so much poli ical u moil and wi h a ela i ely poo in es men clima e, he a e age p o i a e has been p ac ically cons an du ing he las 20 yea s, and a a a e e y much in line wi h ha in o he coun ies.37 The igu e also shows ha he inc emen al p o i - a e displays much sha pe luc ua ions, e en aking on nega i e numbe s (e.g., -31 pe cen in 1985), han he a e age p o i a e.38 36 The p o i a e was calcula ed as he a io o o al p o i s ( ha is, eal GDP a ac o cos , i.e., GDP a ma ke p ices minus indi ec axes and plus subsidies, minus he o al wage bill in eal e ms) o he capi al s ock. The e o e, i is an a e ax eal a e o e u n. The inc emen al p o i a e was calcula ed as he a io o he change in o al p o i s be ween wo consecu i e pe iods o he le el o p o i s lagged one pe iod. The capi al s ock is om Co o a on (2002). The inc emen al p o i a e is es ima ed as he a io o he change in p o i s be ween wo pe iods o in es men lagged one pe iod. 37 Glyn (1997) documen s he e olu ion o p o i a es in a sample o de eloped coun ies. 38 Howe e , i is no clea ha he inc emen al p o i a e leads he g ow h o in es men in he Philippines. I seems ha i is almos he opposi e. This is pa icula ly ue o he collapse o in es men in 1984. The inc emen al p o i a e collapsed in 1985. 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 -0.4 0.0 0.1 -0.3 -0.2 -0.1 0.2 0.3 0.4 P o i a e Inc emen al p o i a e Yea s FIGURE 6: PROFIT RATE AND INCREMENTAL PROFIT RATE SECTION VI DETERMINANTS OF LONG-RUN COMPETITIVENESS AND GROWTH IN THE PHILIPPINES 26 JUNE 2004 COMPETITIVENESS, INCOME DISTRIBUTION, AND GROWTH IN THE PHILIPPINES: WHAT DOES THE LONG-RUN EVIDENCE SHOW? JESUS FELIPE As indica ed abo e, he accumula ion p ocess can be conside ed as he dependence o in es men on he a e o p o i ( / K=Π ). Inc eases in he p o i a e lead o mo e in es men ac i i y as he i m’s expec a ions o u u e p o i abili y a e enhanced. In a compe i i e en i onmen , i ms pu sue all easible p o i oppo uni ies in o de o es ablish a ese e o unds o be used agains h ea s o slumps. I o any eason he p o i a e declines, hen i ms will eac by cu ing back p oduc ion and u u e in es men so as o minimize excess capaci y and cos ly in en o ies. The so-called “Camb idge equa ion” (Pasine i 1962), kp p Igs s KK Π == =, whe e sp is he p opensi y o sa e ou o p o i s and gk is he g ow h a e o he capi al s ock, b ings up he impo ance o p o i s and dis ibu ion in he g ow h p ocess.39 An implica ion o his ela ionship is ha he highes possible in es men (Imax) will be achie ed when all a ailable en e p ise p o i s a e plowed back as p oduc i e inpu s, and his occu s when all p o i s a e sa ed, i.e., 1 p s=. This implies ha he maximum a e o capi al accumula ion (gk)max canno exceed he p o i a e ( ), wi hou a ec ing he a e o in la ion. Algeb aically: Imax = P so ha () max max max k IK g KK K ∆Π    ====       . This being he case, one can in e p e he a io o he ac ual g ow h a e o he maximum g ow h a e (/) k g as an indica o o he deg ee o which he g ow h po en ial o he economy is being u ilized (Shaikh 1999). The g ea e his a io he highe he p obabili y ha excess demand will end up accele a ing in la ion a he hen g ow h. Hence he a io is an index o in la iona y p essu e. Figu e 7 g aphs he g ow h a e o he capi al s ock, he g ow h a e o ou pu , and he p o i a e. I can be seen ha , excep in he ea ly 1980s, when he p o i a e was a ound 3 pe cen age poin s abo e he a e o capi al accumula ion, o he es o he pe iod, he di e ence is a sizeable 7-10 pe cen age poin s. This indica es, i s , ha he e is plen y o oom o inc easing in es men and capi al o ma ion in he Philippines wi hou inducing in la iona y p essu es. Why his does no happen is a ques ion ha policymake s in he coun y ha e o add ess (ADO 2004, 88-93); and second, his helps explain why in la ion in he Philippines is well unde con ol (mo e will be said abou his opic in Sec ion VIII). C. Capi al–Ou pu Ra io, Capi al–Labo Ra io, and Labo P oduc i i y The p o i a e can be w i en as he a io o he capi al sha e in ou pu o he capi al–ou pu a io. The la e displays a sligh inc ease om a ound 2.3 o 2.9 du ing he wo decades analyzed. Figu e 8 g aphs oge he he capi al sha e (calcula ed as one minus he adjus ed labo sha e) and he in e se o he capi al-ou pu a io, ha is, capi al p oduc i i y, which displays a sligh dec easing end. The g aph shows ha he wo a iables mo e in opposi e di ec ions, which explains he app oxima e cons ancy o he p o i a e. In o he wo ds: wi h capi al p oduc i i y declining, he p o i a e main ained i s cons ancy a he expense o a declining labo sha e. Likewise, he capi al– ou pu a io can be w i en as he p oduc o he capi al–labo a io, shown in Figu e 9, imes 39 This equa ion is undamen al o he pos -Keynesian school o hough o i is he essence o hei model o g ow h and dis ibu ion (Pasine i 1962). The equa ion says ha he a e o p o i does no depend on mic oeconomic echnical condi ions, o on ela i e physical endowmen s, like in he neoclassical model, bu solely on mac oeconomic a iables, namely he a e o accumula ion and he p opensi y o sa e on p o i s. 27ERD WORKING PAPER SERIES NO. 53 FIGURE 7: PROFIT RATE, GROWTH RATE OF CAPITAL STOCK, AND GROWTH OF OUTPUT 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 -0.10 -0.05 0.00 0.05 0.10 0.15 P o i a e Capi al s ock Ou pu Yea s he uni labo equi emen , i.e., he in e se o labo p oduc i i y, he la e shown in Figu e 10.40 I is wo h no ing ha he capi al–labo a io has been s agnan du ing he 20-yea pe iod a a ound P200,000. The a io inc eased sligh ly du ing he ea ly 1980s. Then i wen down and ouched bo om in 1988-1989, and emained la un il 1996. Since i has begun eco e ing. The annual g ow h a es o his subpe iod a e as ollows (in pe cen ): 2.92 (1996-1997); 6.90; -1.54; 4.85; -2.13; 0.20 (2001-2002). These a e s ill e y low a es and do no e lec a consis en upwa d pa h. Labo p oduc i i y declined be ween 1980 and 1993, when i ouched bo om and eached a alue o 77 pe cen ha o he maximum o he pe iod, 1982. Since hen i has begun inc easing, bu a a e y slow pace ( o 1993-2002 i has g own a a a e o 1.20 pe cen pe annum) and i is s ill a ound 90 pe cen o he le el o he ea ly 1980s.41 These igu es co obo a e he conclusions o He in and Pe nia (2003, 298), namely, ha he s agna ion o labo p oduc i i y in he Philippines is he esul o a la capi al–labo a io, indica ing ha i ms ha e ailed o in es in s a e o he a echnology and implemen bes p ac ice. To his ac o i mus be added ha he Philippine labo o ce ha has been unable o main ain he le el o human capi al; and he apid expansion 40 Labo p oduc i i y was calcula ed as he a io o eal GDP a ac o cos di ided by o al employmen . 41 Fo e e ence, a dynamic eg ession o labo p oduc i i y on he capi al-labo a io yields he ollowing esul s: GLPRODRPH = 0.174 + 0.463*GLPRODRPH(-1) + 0.882*GKL - 0.536*GKL(-1) (0.09) (2.49) (3.82) (1.94) – 0.299*LLPRODRPH(-1) + 0.259*LKL(–1) (-2.66) (1.46) Pe iod: 1980-2002;R2 =0.538; D.W.=1.87 whe e GKL deno es he g ow h a e o he capi al-labo a io and LKL is he na u al loga i hm o he capi al-labo a io. This esul implies a long- un elas ici y o 0.87 [(0.259/(-0.299)] wi h a -s a is ic o 1.78, indica ing ha a one pe cen age poin inc ease in he capi al–labo a io leads o a labo p oduc i i y inc ease o 0.87 pe cen . As be o e, his equa ion should no be aken as an e o a modeling labo p oduc i i y. The la e is also a ec ed by, o example, human capi al. SECTION VI DETERMINANTS OF LONG-RUN COMPETITIVENESS AND GROWTH IN THE PHILIPPINES 28 JUNE 2004 COMPETITIVENESS, INCOME DISTRIBUTION, AND GROWTH IN THE PHILIPPINES: WHAT DOES THE LONG-RUN EVIDENCE SHOW? JESUS FELIPE o employmen in he low-p oduc i i y se ices sec o . Fo e e ence, he annual inc eases (dec eases) in labo p oduc i i y o his pe iod a e (in pe cen age): -0.87 (1992-1993); 0.69; 2.15; 0.11; 1.99; 3.21; -0.35; 7.32; -3.48; 1.22 (2001-2002). The p o i a e can also be decomposed in o he p oduc o he capi al sha e imes he in e se o he capi al–labo a io and imes labo p oduc i i y. Wha has occu ed in he Philippines? The capi al sha e has inc eased (mi o image o he decline in he labo sha e); he capi al–labo a io has been app oxima ely cons an a a ound P200,000; and labo p oduc i i y has declined (i.e., he in e se, o uni labo equi emen , has inc eased) om almos P90,000 o a ound P75,000. This “combina ion” is wha has kep he p o i a e cons an .42, 43 The dec ease in capi al p oduc i i y can be also app ecia ed by analyzing he inc emen al capi al–ou pu a io, he a io o he change in he capi al s ock o he change in ou pu . Figu e 11 shows a h ee-yea mo ing a e age o he ICOR. The ICOR is aken o be a (con o e sial) p oxy o in es men e iciency, and is in e p e ed as he numbe o uni s o addi ional capi al equi ed 42 No e ha his decomposi ion o he p o i a e is, o a ce ain deg ee, a au ology. Ob iously (/)(/)(/) VALKVAL=Π . Howe e , he manne in which one decomposes a a iable is de e mined by heo y (neoclassical economics, o example, does no conside he p o i he way i appea s in o he heo ies). Mo eo e , i is use ul o know how he h ee a iables beha e as componen s o he p o i a e. This allows one o say how much each componen accoun s o in he o al, while admi ing di e en eadings o easons why hey mo e as hey do. 43 I should be added ha capi al p oduc i i y, which is de e mined by echnology (i.e., he p oduc ion echnique being used), should be adjus ed o capaci y u iliza ion. This is impo an , and should be included in he decomposi ion. The eason is ha o he wise, he measu ed capi al p oduc i i y would be mixing up i s echnical de e minan s and demand luc ua ions. The Philippines does no ha e a measu e o capaci y u iliza ion ha goes back o 1980. Fo his eason i is no adjus ed i and so his ac mus be bo ne in mind. 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 0.20 0.25 0.30 0.35 0.40 0.45 Capi al p oduc i i y Capi al sha e Yea s FIGURE 8: CAPITAL PRODUCTIVITY AND CAPITAL SHARE 29ERD WORKING PAPER SERIES NO. 53 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 100000.00 150000.00 200000.00 250000.00 Yea s FIGURE 9: CAPITAL–LABOR RATIO 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 60000 70000 80000 90000 85000 75000 65000 Yea s FIGURE 10: LABOR PRODUCTIVITY 44 ICORS a e ob iously ela ed o he capi al–ou pu a io. I he economy is a ull capaci y, he ICOR will app oxima e he capi al–ou pu a io. The la e is in ac bu he cumula ion o he o me o e he li e ime o capi al asse s. ICORs luc ua e mo e han capi al–ou pu a ios. Indeed, he his o ical mo emen o he capi al–ou pu a io is simply he end o he ICOR smoo hed o e he li e ime o capi al. Typically, he ICOR is abo e he capi al–ou pu a io du ing a downswing, and below i du ing he upswing. The e a e no ules abou he magni ude o he ICOR and hus one should be ca e ul in e p e ing he igu es o making in e ences. Besides, in a emp ing o calcula e ICORs, he s age o he business cycle mus always be bo ne in mind. As indica ed abo e, a ull capaci y, he ICOR will app oxima e he capi al–ou pu a io. In he Philippines, he a e age capi al–ou pu a io o 1980-2000 is a ound 2.7. The ICOR di e ges om i o en. I he economy is wo king below capaci y, e y li le ex a capi al will be needed o inc ease ou pu and subs an ial g ow h may be associa ed wi h ela i ely li le capi al accumula ion. o yield a uni o addi ional ou pu .44 ICORs end o be high (abo e 5) when in es men is ine icien ly managed, o when in es men is unde aken in a eas ha do no gene a e g ow h. I means ha he economy equi es ela i ely la ge addi ions o capi al o p oduce one addi ional uni low o SECTION VI DETERMINANTS OF LONG-RUN COMPETITIVENESS AND GROWTH IN THE PHILIPPINES 30 JUNE 2004 COMPETITIVENESS, INCOME DISTRIBUTION, AND GROWTH IN THE PHILIPPINES: WHAT DOES THE LONG-RUN EVIDENCE SHOW? JESUS FELIPE ou pu . Also, nega i e ICORS indica e ei he ha he coun y is su e ing a decapi aliza ion p ocess, o ha ou pu is dec easing. Mo e han e y high ICORs, wha cha ac e izes he Philippine economy is nega i e ones (-20.4 in 1992; -10.8 in 1998; he a e age o he pe iod is -0.14). VII. DYNAMICS OF INCOME DISTRIBUTION The g ow h a e o ulc is he sum o he g ow h a e o he labo sha e plus he g ow h a e o he a io o exchange a es, i.e., ˆˆˆ L ulc s x =+. The e o e, he dynamics o ulc depends on how hese wo componen s mo e. As indica ed abo e, yea ly changes in he labo sha e a e e y small, hence ˆ0 L s≅ as an app oxima ion, excep in pe iods o c ises when impo an eadjus men s in he balance o powe be ween labo and capi al akes place. This indica es ha ˆ ulc will be mos ly de e mined in he sho un by changes in x , i.e., ˆˆ ulc x ≅. Figu e 12 plo s he h ee g ow h a es, con i ming, i s , ha ac o sha es a y ela i ely li le om pe iod o pe iod, i.e., ˆ0 L s≅, excep in pe iods o c ises (e.g., ea ly 1980s), and ha he obse ed changes in ulcs a e mos ly he esul o changes in he a io o he wo exchange a es, i.e., ˆˆ ulc x ≅.45 The same occu s in e ms o he ulc in coun y i ela i e o ha in coun y j, i.e., ˆˆˆˆˆ iL L j iijj ulc s x s x =+−−. Since ˆˆ0 LL ij ss≅≅, hen ˆˆˆ i jij ulc x x ≅−. Figu e 13 g aphs oge he he g ow h a e o he ulc, he di e ence be ween he g ow h a es o he labo sha es, ˆˆ LL ij ss−, and he di e ence be ween he g ow h a es o he a ios o exchange a es, ˆˆ ij x x − o he PRC and he Philippines. Once again i is clea ha he obse ed di e ences in he g ow h a e o he ulc is mos ly he esul o he changes in he di e ence be ween he g ow h a es o he a ios o exchange a es, i.e., ˆˆˆ i j ij ulc x x ≅−. 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 -10 -8 -2 0 -6 -4 2 4 6 Yea s FIGURE 11: 3-YEAR MOVING AVERAGE OF THE INCREMENTAL CAPITAL–OUTPUT RATIO 45 The co ela ion coe icien be ween he g ow h a e o ulc and ha o x is 0.93; be ween he g ow h a e o ulc and ha o he labo sha e is 0.31; and be ween he g ow h a e o he labo sha e and ha o he a io o exchange a es is -0.04. Wi h he a iables in le els hese coe icien s a e 0.86, 0.26, and –0.26, espec i ely. This con i ms ha ulcs and he a io o exchange a es mo e pa i passu. 31ERD WORKING PAPER SERIES NO. 53 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 -0.10 -0.05 0.00 0.05 0.10 0.15 -0.15 -0.20 -0.25 ULC Labo sha e Ra io o PPP o ER FIGURE 12: GROWTH RATES OF ULC, LABOR SHARE, AND RATIO OF PPP TO EXCHANGE RATES Finally, equa ion (8) abo e indica es ha wi h a ising capi al-ou pu a io, a alling p o i a e is needed o open oom o he wage a e o equal o exceed he labo p oduc i i y g ow h a e, and ice- e sa. Figu e 14 shows he dynamics o income dis ibu ion implied by equa ion (8) by compa ing he di e ence be ween he g ow h a es o he eal wage a e and labo p oduc i i y ( ˆˆ wq−), and he g ow h a e o he eal p o i a e ( ˆ ). The igu e shows how he wo a iables mo e in opposi e di ec ions, e lec ing he ac ha gains in eal wages a es equal o abo e labo p oduc i i y can come only a he expense o educ ions in he eal a e o e u n, and ice- e sa. In o he wo ds: in an economy wi h a ising capi al-ou pu a io, i he eal wage a e inc eases a he same a e o as e han labo p oduc i i y, he p o i a e mus decline. SECTION VII DYNAMICS OF INCOME DISTRIBUTION 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 -0.1 0.2 0.3 0.4 0.0 -0.1 -0.2 ULC Labo sha e Ra io o PPP o ER Yea s FIGURE 13: GROWTH RATE OF RELATIVE UNIT LABOR COSTS: PEOPLE’S REPUBLIC OF CHINA AND THE PHILIPPINES 32 JUNE 2004 COMPETITIVENESS, INCOME DISTRIBUTION, AND GROWTH IN THE PHILIPPINES: WHAT DOES THE LONG-RUN EVIDENCE SHOW? JESUS FELIPE VIII. DEGREE OF MONOPOLY IN THE PHILIPPINES Equa ions (11)-(12) abo e show he ela ionship be ween he ma k-up and capi al’s sha e, e e ed o by Kalecki as he deg ee o monopoly, and in e p e ed as a p oxy o he i ms’ capaci y o en o ce a ce ain claim on p o i s agains labo e s and compe i o s. Figu e 15 shows he ma k- up de i ed om equa ion (8). The a iable displays an inc easing end, om a alue o 0.35 in 1980 o a maximum o 0.59 in 1999, an inc ease o o e 50 pe cen , and hen a sligh dec ease. This is in e p e ed as e idence o he inc easing ma ke powe o capi al is-à- is labo du ing he 20-yea pe iod conside ed.46 High ma ke powe could indica e one o wo hings: (i) ei he a i m is e icien (in e ms o adop ing echnological inno a ions, e icien manage ial echniques, and o he legi ima e business p ac ices); o (ii) a i m is able o exe ma ke powe because i possesses a dominan posi ion in he ma ke . Mos likely, a low-g ow h coun y like he Philippines displays a low ulc due o a high ma k-up (equa ion [13]), made possible by he absence o compe i ion in he ma ke . And ice- e sa: high-g ow h coun ies may display high ulcs due o ela i ely low ma kups, p obably because e ec i e compe i ion is p esen . As indica ed abo e, his p o ides an answe o “Kaldo ’s pa adox.” FIGURE 14: GROWTH RATES OF REAL WAGES, LABOR PRODUCTIVITY, AND PROFIT RATE 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 -0.10 -0.05 0.00 0.05 0.10 0.15 -0.15 -0.20 -0.25 G ow h a e o eal wage a e minus labo p oduc i i y P o i a e Yea s 46 S eindl (1952 and 1979) has a gued ha inc eases in concen a ion (i.e., monopoliza ion) lead o highe ma k-ups and, wi h p o i s de e mined by pas in es men decisions, a slow-down on capaci y u iliza ion esul s, which inc eases excess capaci y and ad e sely a ec s in es men decisions. The economy, he e o e, ends o s agna e. The lack o in es men in he Philippines may be also pa ially a ibu able o he inc ease in concen a ion. 33ERD WORKING PAPER SERIES NO. 53 These esul s co obo a e wha is well known abou he Philippines, namely ha he coun y is cha ac e ized by a lack o cul u e o compe i ion; monopolies and ca els a e accep ed as pa o he no mal cou se o doing business. This beha io uns e y much agains he e y essen ial ac o capi alism, namely Schumpe e ’s (1942, 83) idea o c ea i e des uc ion, he need o incessan ly e olu ionize om wi hin wi h a iew o des oying old me hods o p oduc ion, anspo a ion, and ma ke s; and c ea ing new ones. C ea i e des uc ion is a complex and unce ain p ocess ha in ol es ial and e o . This equi es an en i onmen whe e compe i ion can lou ish o i is he cons an compe i i e p essu e o a well-de eloped ma ke mechanism ha encou ages i ms o adop echnological and o ganiza ional bes p ac ices. The dynamics o echnological change and p oduc i i y g ow h a e s ongly connec ed o he ealloca ion o p oduc ion inpu s and ou pu ac oss es ablishmen s. Easiness o en y and exi o es ablishmen s, and in gene al compe i ion policies, play an impo an ole in his ealloca ion (ADB 2003, Figu e 1). Thus, dis o ions in ma ke s uc u e, ins i u ions, and go e nmen policies ha impac he ealloca ion p ocess impac nega i ely p oduc i i y g ow h. Ma ke impe ec ions such as impe ec capi al ma ke s can dis o he ealloca ion p ocess. I is e y likely ha such ma ke impe ec ions a e mo e impo an o small businesses, many o which in he Philippines a e single es ablishmen s wi h an owne -manage , p o iding sel - employmen . I is e y likely ha he p esence o an owne -manage in a i m yields a lowe p obabili y o exi (Holmes and Schmi z 1992). The Philippines clea ly su e s om his business clima e. Thus, one mus conclude ha he subs an ial economic e o ms ha ha e opened up he economy o o eign ade and in es men since he 1980s ha e no had much success. The e a e many possible explana ions (e.g., he coun y has gone h ough ad e se shocks, he policy egime con inues being biased agains expo s) why his has happened and i would be wo h explo ing hem.47 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 0.6 0.5 0.4 0.3 0.2 Yea s FIGURE 15: MARK-UP (DEGREE OF MONOPOLY) 47 The au ho is hank ul o Ra aeli a Aldaba who made his impo an poin in a pe sonal exchange. I mus be added ha ecen wo k (E o 2004) a gues ha monopolies can, in some ci cums ances, beha e mo e compe i i ely han i ms in ma ke s in which he e is no dominan playe . This is so when he monopolis does i s bes a keeping i s ad an ageous posi ion by cons an ly in es ing in R&D, which in u n is likely o g ea e inno a ion and u he monopoly powe . The mos impo an equi emen o his esul is a lack o ba ie s o en y. SECTION VIII DEGREE OF MONOPOLY IN THE PHILIPPINES 34 JUNE 2004 COMPETITIVENESS, INCOME DISTRIBUTION, AND GROWTH IN THE PHILIPPINES: WHAT DOES THE LONG-RUN EVIDENCE SHOW? JESUS FELIPE As a gued in Sec ion IV, he ela ionship be ween labo p oduc i i y, wages, and ma k-ups is an impo an aspec o he dynamics o in income dis ibu ion (equa ion [14]). Figu e 16 shows ha in he Philippines he nominal wage a e has consis en ly g own as e han labo p oduc i i y, i.e., ˆˆ ()0 n wq−> . As indica ed in Sec ion IV, ˆ τ , whe e 1 τ µ =+ , e lec s he powe o co po a ions o pass on wage ises in he o m o highe p ices. Figu e 16 also plo s ˆ τ , which shows ha in he Philippines he e ha e been pe iods whe e ˆ0 τ > (shi o powe o capi al), leading o ˆˆˆ () n Pwq>− ; while in o he pe iods ˆ0 τ < (shi o powe o labo ), leading o ˆˆˆ () n Pwq<− . Bu o e all, episodes o ˆ0 τ > ou weigh episodes o ˆ0 τ < ( he sum o he o al pe iod equals 0.11728), wi h he end esul ha , as documen ed be o e, he ma k-up (and hus he sha e o capi al) has inc eased subs an ially.48 This also indica es ha inc eases in he ma k-up ha e con ibu ed o inc eases in p ices abo e he di e en ial ˆˆ ()0 n wq−> and, hence, o he loss in compe i i eness.49 48 Fo e e ence, a dynamic eg ession, es ima ed in e o -co ec ion o m, o he nominal wage a e on labo p oduc i i y yields he ollowing esul s: GWPH = -7.696 - 0.276*GWPH(-2) + 1.267*GLPRODRPH + 0.632*GLPRODRPH(-2) (-2.81) (-2.03) (3.65) (2.27) + 0.551*GLPRODRPH(-3) - 0.127*LWPH(-1) + 0.818*LLPRODRPH(-1) (1.93) (-4.75) (3.36) Pe iod: 1980-2002; R2 =0.71; D.W.=1.67 whe e GWPH and GLPRODRPH deno e he g ow h a es o he nominal wage a e and labo p oduc i i y, espec i ely; and LWPH and LLPRODRPH deno e he na u al loga i hms o he wo a iables. This esul implies a long- un elas ici y o 6.44 [(-0.818/(-0.127)] wi h a -s a is ic o 2.72, indica ing ha a one pe cen age poin inc ease in labo p oduc i i y leads o a nominal wage inc ease o 6.44 pe cen . I is impo an o emphasize ha his equa ion should no be aken as an e o a modeling wages. The la e a e also a ec ed by a iables such as he powe o ade unions, unemploymen , and p o i a es. 49 He e equa ion (14) is used as an accoun ing iden i y o in e he ma k-up, and hus in la ion is exclusi ely a ibu ed o he wo ac o s ha appea in he exp ession, namely, he ma k-up and he di e en ial be ween he wage a e and p oduc i i y. Ne e heless, a eg ession o he in la ion a e ( ˆ P) on he di e en ial be ween he g ow h a es o he nominal wage a e and labo p oduc i i y ( ˆˆ n wq−) yields excellen esul s. 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 Yea s 0.3 0.2 0.1 0.0 -0.1 0.4 G ow h a e o nominal wage a e minus labo p oduc i i y G ow h a e o ma k-up FIGURE 16: GROWTH RATES OF NOMINAL WAGES, LABOR PRODUCTIVITY, AND MARK-UP 41 De elopmen Bank —Da id Dole and Piya Abeygunawa dena Sep embe 2002 No. 6 Economic Analysis o Heal h P ojec s: A Case S udy in Cambodia —E ik Bloom and Pe e Choynowski May 2003 No. 7 S eng hening he Economic Analysis o Na u al Resou ce Managemen P ojec s —Kei h Wa d Sep embe 2003 No. 8 Tes ing Sa ings P oduc Inno a ions Using an Expe imen al Me hodology —Na a Ash a , Dean S. Ka lan, and Wesley Yin No embe 2003 ERD POLICY BRIEF SERIES (PBS) (Published in-house; A ailable h ough ADB O ice o Ex e nal Rela ions; F ee o cha ge) No. 1 Is G ow h Good Enough o he Poo ? —E nes o M. Pe nia, Oc obe 2001 No. 2 India’s Economic Re o ms Wha Has Been Accomplished? Wha Remains o Be Done? —A ind Panaga iya, No embe 2001 No. 3 Unequal Bene i s o G ow h in Vie Nam —Indu Bhushan, E ik Bloom, and Nguyen Minh Thang, Janua y 2002 No. 4 Is Vola ili y Buil in o Today’s Wo ld Economy? —J. Malcolm Dowling and J.P. Ve bies , Feb ua y 2002 No. 5 Wha Else Besides G ow h Ma e s o Po e y Reduc ion? Philippines —A senio M. Balisacan and E nes o M. Pe nia, Feb ua y 2002 No. 6 Achie ing he Twin Objec i es o E iciency and Equi y: Con ac ing Heal h Se ices in Cambodia —Indu Bhushan, She yl Kelle , and B ad Schwa z, Ma ch 2002 No. 7 Causes o he 1997 Asian Financial C isis: Wha Can an Ea ly Wa ning Sys em Model Tell Us? —Juzhong Zhuang and Malcolm Dowling, June 2002 No. 8 The Role o P e e en ial T ading A angemen s in Asia —Ch is ophe Edmonds and Jean-Pie e Ve bies , July 2002 No. 9 The Doha Round: A De elopmen Pe spec i e —Jean-Pie e Ve bies , Je ey Liang, and Lea Sumulong July 2002 No. 10 Is Economic Openness Good o Regional De elopmen and Po e y Reduc ion? The Philippines —E. M. Pe nia and P. F. Quising Oc obe 2002 No. 11 Implica ions o a US Dolla Dep ecia ion o Asian De eloping Coun ies —Emma Fan July 2002 No. 12 Dange s o De la ion —D. B ooks and P. F. Quising Decembe 2002 No. 13 In as uc u e and Po e y Reduc ion— Wha is he Connec ion? —I. Ali and E. Pe nia Janua y 2003 No. 14 In as uc u e and Po e y Reduc ion— Making Ma ke s Wo k o he Poo —Xianbin Yao May 2003 No. 15 SARS: Economic Impac s and Implica ions —Emma Xiaoqin Fan May 2003 No. 16 Eme ging Tax Issues: Implica ions o Globaliza ion and Technology —Kanokpan Lao A aya May 2003 No. 17 P o-Poo G ow h: Wha is I and Why is I Impo an ? —E nes o M. Pe nia May 2003 No. 18 Public–P i a e Pa ne ship o Compe i i eness —Jesus Felipe June 2003 No. 19 Re i ing Asian Economic G ow h Requi es Fu he Re o ms —I zal Ali June 2003 No. 20 The Millennium De elopmen Goals and Po e y: A e We Coun ing he Wo ld’s Poo Righ ? —M. G. Quib ia July 2003 No. 21 T ade and Po e y: Wha a e he Connec ions? —Douglas H. B ooks July 2003 No. 22 Adap ing Educa ion o he Global Economy —Oli ie Dup iez Sep embe 2003 No. 23 A ian Flu: An Economic Assessmen o Selec ed De eloping Coun ies in Asia —Jean-Pie e Ve bies and Cha issa Cas illo Ma ch 2004 No. 25 Pu chasing Powe Pa i ies and he In e na ional Compa ison P og am in a Globalized Wo ld —Bishnu Pan Ma ch 2004 No. 26 A No e on Dual/Mul iple Exchange Ra es —Emma Xiaoqin Fan May 2004 No. 27 Inclusi e G ow h o Sus ainable Po e y Reduc ion in De eloping Asia: The Enabling Role o In as uc u e De elopmen —I zal Ali and Xianbin Yao May 2004 No. 9 Se ing Use Cha ges o Public Se ices: Policies and P ac ice a he Asian De elopmen Bank —Da id Dole Decembe 2003 No. 10 Beyond Cos Reco e y: Se ing Use Cha ges o Financial, Economic, and Social Goals —Da id Dole and Ian Ba le Janua y 2004 No. 11 Shadow Exchange Ra es o P ojec Economic Analysis: Towa d Imp o ing P ac ice a he Asian De elopmen Bank —Anneli Lagman-Ma in Feb ua y 2004 42 MONOGRAPH SERIES (Published in-house; A ailable h ough ADB O ice o Ex e nal Rela ions; F ee o cha ge) EDRC REPORT SERIES (ER) No. 1 ASEAN and he Asian De elopmen Bank —Seiji Naya, Ap il 1982 No. 2 De elopmen Issues o he De eloping Eas and Sou heas Asian Coun ies and In e na ional Coope a ion —Seiji Naya and G aham Abbo , Ap il 1982 No. 3 Aid, Sa ings, and G ow h in he Asian Region —J. Malcolm Dowling and Ul ich Hiemenz, Ap il 1982 No. 4 De elopmen -o ien ed Fo eign In es men and he Role o ADB —Kiyoshi Kojima, Ap il 1982 No. 5 The Mul ila e al De elopmen Banks and he In e na ional Economy’s Missing Public Sec o —John Lewis, June 1982 No. 6 No es on Ex e nal Deb o DMCs —E elyn Go, July 1982 No. 7 G an Elemen in Bank Loans —Dal Hyun Kim, July 1982 No. 8 Shadow Exchange Ra es and S anda d Con e sion Fac o s in P ojec E alua ion —Pe e Wa , Sep embe 1982 No. 9 Small and Medium-Scale Manu ac u ing Es ablishmen s in ASEAN Coun ies: Pe spec i es and Policy Issues —Ma hias B uch and Ul ich Hiemenz, Janua y 1983 No. 10 A No e on he Thi d Minis e ial Mee ing o GATT —Jungsoo Lee, Janua y 1983 No. 11 Mac oeconomic Fo ecas s o he Republic o China, Hong Kong, and Republic o Ko ea —J.M. Dowling, Janua y 1983 No. 12 ASEAN: Economic Si ua ion and P ospec s —Seiji Naya, Ma ch 1983 No. 13 The Fu u e P ospec s o he De eloping Coun ies o Asia —Seiji Naya, Ma ch 1983 No. 14 Ene gy and S uc u al Change in he Asia- Paci ic Region, Summa y o he Thi een h Paci ic T ade and De elopmen Con e ence —Seiji Naya, Ma ch 1983 No. 15 A Su ey o Empi ical S udies on Demand o Elec ici y wi h Special Emphasis on P ice Elas ici y o Demand —Wisa n Puppha esa, June 1983 No. 16 De e minan s o Paddy P oduc ion in Indonesia: 1972-1981–A Simul aneous Equa ion Model App oach —T.K. Jaya aman, June 1983 No. 17 The Philippine Economy: Economic Fo ecas s o 1983 and 1984 —J.M. Dowling, E. Go, and C.N. Cas illo, June 1983 No. 18 Economic Fo ecas o Indonesia —J.M. Dowling, H.Y. Kim, Y.K. Wang, and C.N. Cas illo, June 1983 No. 19 Rela i e Ex e nal Deb Si ua ion o Asian De eloping Coun ies: An Applica ion o Ranking Me hod —Jungsoo Lee, June 1983 No. 20 New E idence on Yields, Fe ilize Applica ion, and P ices in Asian Rice P oduc ion —William James and Te esi a Rami ez, July 1983 No. 21 In la iona y E ec s o Exchange Ra e Changes in Nine Asian LDCs —P adumna B. Rana and J. Malcolm Dowling, J ., Decembe 1983 No. 22 E ec s o Ex e nal Shocks on he Balance o Paymen s, Policy Responses, and Deb P oblems o Asian De eloping Coun ies —Seiji Naya, Decembe 1983 No. 23 Changing T ade Pa e ns and Policy Issues: The P ospec s o Eas and Sou heas Asian De eloping Coun ies —Seiji Naya and Ul ich Hiemenz, Feb ua y 1984 SERIALS (Co-published wi h Ox o d Uni e si y P ess; A ailable comme cially h ough Ox o d Uni e si y P ess O ices, Associa ed Companies, and Agen s) 1. Asian De elopmen Ou look (ADO; annual) $36.00 (pape back) 2. 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Kohli, No embe 1984 No. 28 The E ec o Te ms o T ade Changes on he Balance o Paymen s and Real Na ional Income o Asian De eloping Coun ies —Jungsoo Lee and Lu ga da Labios, Janua y 1985 No. 29 Cause and E ec in he Wo ld Suga Ma ke : Some Empi ical Findings 1951-1982 —Yoshihi o Iwasaki, Feb ua y 1985 No. 30 Sou ces o Balance o Paymen s P oblem in he 1970s: The Asian Expe ience —P adumna Rana, Feb ua y 1985 No. 31 India’s Manu ac u ed Expo s: An Analysis o Supply Sec o s —I zal Ali, Feb ua y 1985 No. 32 Mee ing Basic Human Needs in Asian De eloping Coun ies —Jungsoo Lee and Emma Bana ia, Ma ch 1985 No. 33 The Impac o Fo eign Capi al In low on In es men and Economic G ow h in De eloping Asia —E elyn Go, May 1985 No. 34 The Clima e o Ene gy De elopmen in he Paci ic and Asian Region: P io i ies and Pe spec i es —V.V. Desai, Ap il 1986 No. 35 Impac o App ecia ion o he Yen on De eloping Membe Coun ies o he Bank —Jungsoo Lee, P adumna Rana, and I zal Ali, May 1986 No. 36 Smuggling and Domes ic Economic Policies in De eloping Coun ies —A.H.M.N. Chowdhu y, Oc obe 1986 No. 37 Public In es men C i e ia: Economic In e nal Ra e o Re u n and Equalizing Discoun Ra e —I zal Ali, No embe 1986 No. 38 Re iew o he Theo y o Neoclassical Poli ical Economy: An Applica ion o T ade Policies —M.G. Quib ia, Decembe 1986 No. 39 Fac o s In luencing he Choice o Loca ion: Local and Fo eign Fi ms in he Philippines —E.M. Pe nia and A.N. He in, Feb ua y 1987 No. 40 A Demog aphic Pe spec i e on De eloping Asia and I s Rele ance o he Bank —E.M. Pe nia, May 1987 No. 41 Eme ging Issues in Asia and Social Cos Bene i Analysis —I. Ali, Sep embe 1988 No. 42 Shi ing Re ealed Compa a i e Ad an age: Expe iences o Asian and Paci ic De eloping Coun ies —P.B. Rana, No embe 1988 No. 43 Ag icul u al P ice Policy in Asia: Issues and A eas o Re o ms —I. Ali, No embe 1988 No. 44 Se ice T ade and Asian De eloping Economies —M.G. Quib ia, Oc obe 1989 No. 45 A Re iew o he Economic Analysis o Powe P ojec s in Asia and Iden i ica ion o A eas o Imp o emen —I. Ali, No embe 1989 No. 46 G ow h Pe spec i e and Challenges o Asia: A eas o Policy Re iew and Resea ch —I. Ali, No embe 1989 No. 47 An App oach o Es ima ing he Po e y Alle ia ion Impac o an Ag icul u al P ojec —I. Ali, Janua y 1990 No. 48 Economic G ow h Pe o mance o Indonesia, he Philippines, and Thailand: The Human Resou ce Dimension —E.M. Pe nia, Janua y 1990 No. 49 Fo eign Exchange and Fiscal Impac o a P ojec : A Me hodological F amewo k o Es ima ion —I. Ali, Feb ua y 1990 No. 50 Public In es men C i e ia: Financial and Economic In e nal Ra es o Re u n —I. Ali, Ap il 1990 No. 51 E alua ion o Wa e Supply P ojec s: An Economic F amewo k —A lene M. Tadle, June 1990 No. 52 In e ela ionship Be ween Shadow P ices, P ojec In es men , and Policy Re o ms: An Analy ical F amewo k —I. Ali, No embe 1990 No. 53 Issues in Assessing he Impac o P ojec and Sec o Adjus men Lending —I. Ali, Decembe 1990 No. 54 Some Aspec s o U baniza ion and he En i onmen in Sou heas Asia —E nes o M. Pe nia, Janua y 1991 No. 55 Financial Sec o and Economic De elopmen : A Su ey —Jungsoo Lee, Sep embe 1991 No. 56 A F amewo k o Jus i ying Bank-Assis ed Educa ion P ojec s in Asia: A Re iew o he Socioeconomic Analysis and Iden i ica ion o A eas o Imp o emen —E ienne Van De Walle, Feb ua y 1992 No. 57 Medium- e m G ow h-S abiliza ion Rela ionship in Asian De eloping Coun ies and Some Policy Conside a ions —Yun-Hwan Kim, Feb ua y 1993 No. 58 U baniza ion, Popula ion Dis ibu ion, and Economic De elopmen in Asia —E nes o M. Pe nia, Feb ua y 1993 No. 59 The Need o Fiscal Consolida ion in Nepal: The Resul s o a Simula ion —Filippo di Mau o and Ronald An onio Bu iong, July 1993 No. 60 A Compu able Gene al Equilib ium Model o Nepal —Timo hy Bueh e and Filippo di Mau o, Oc obe 1993 No. 61 The Role o Go e nmen in Expo Expansion in he Republic o Ko ea: A Re isi —Yun-Hwan Kim, Feb ua y 1994 No. 62 Ru al Re o ms, S uc u al Change, and Ag icul u al G ow h in he People’s Republic o China —Bo Lin, Augus 1994 No. 63 Incen i es and Regula ion o Pollu ion Aba emen wi h an Applica ion o Was e Wa e T ea men —Sudip o Mundle, U. Shanka , and Shekha Meh a, Oc obe 1995 No. 64 Sa ing T ansi ions in Sou heas Asia —F ank Ha igan, Feb ua y 1996 No. 65 To al Fac o P oduc i i y G ow h in Eas Asia: A C i ical Su ey —Jesus Felipe, Sep embe 1997 No. 66 Fo eign Di ec In es men in Pakis an: Policy Issues and Ope a ional Implica ions —Ash aque H. Khan and Yun-Hwan Kim, July 1999 No. 67 Fiscal Policy, Income Dis ibu ion and G ow h —Sailesh K. Jha, No embe 1999 44 No. 1 In e na ional Rese es: Fac o s De e mining Needs and Adequacy —E elyn Go, May 1981 No. 2 Domes ic Sa ings in Selec ed De eloping Asian Coun ies —Basil Moo e, assis ed by A.H.M. Nu uddin Chowdhu y, Sep embe 1981 No. 3 Changes in Consump ion, Impo s and Expo s o Oil Since 1973: A P elimina y Su ey o he De eloping Membe Coun ies o he Asian De elopmen Bank —Dal Hyun Kim and G aham Abbo , Sep embe 1981 No. 4 By-Passed A eas, Regional Inequali ies, and De elopmen Policies in Selec ed Sou heas Asian Coun ies —William James, Oc obe 1981 No. 5 Asian Ag icul u e and Economic De elopmen —William James, Ma ch 1982 No. 6 In la ion in De eloping Membe Coun ies: An Analysis o Recen T ends —A.H.M. Nu uddin Chowdhu y and J. Malcolm Dowling, Ma ch 1982 No. 7 Indus ial G ow h and Employmen in De eloping Asian Coun ies: Issues and Pe spec i es o he Coming Decade —Ul ich Hiemenz, Ma ch 1982 No. 8 Pe odolla Recycling 1973-1980. Pa 1: Regional Adjus men s and he Wo ld Economy —Bu nham Campbell, Ap il 1982 No. 9 De eloping Asia: The Impo ance o Domes ic Policies —Economics O ice S a unde he di ec ion o Seiji Naya, May 1982 No. 10 Financial De elopmen and Household Sa ings: Issues in Domes ic Resou ce Mobiliza ion in Asian De eloping Coun ies —Wan-Soon Kim, July 1982 No. 11 Indus ial De elopmen : Role o Specialized Financial Ins i u ions —Keda N. Kohli, Augus 1982 No. 12 Pe odolla Recycling 1973-1980. Pa II: Deb P oblems and an E alua ion o Sugges ed Remedies —Bu nham Campbell, Sep embe 1982 No. 13 C edi Ra ioning, Ru al Sa ings, and Financial Policy in De eloping Coun ies —William James, Sep embe 1982 No. 14 Small and Medium-Scale Manu ac u ing Es ablishmen s in ASEAN Coun ies: Pe spec i es and Policy Issues —Ma hias B uch and Ul ich Hiemenz, Ma ch 1983 No. 15 Income Dis ibu ion and Economic G ow h in De eloping Asian Coun ies —J. Malcolm Dowling and Da id Soo, Ma ch 1983 No. 16 Long-Run Deb -Se icing Capaci y o Asian De eloping Coun ies: An Applica ion o C i ical In e es Ra e App oach —Jungsoo Lee, June 1983 No. 17 Ex e nal Shocks, Ene gy Policy, and Mac oeconomic Pe o mance o Asian De eloping Coun ies: A Policy Analysis —William James, July 1983 No. 18 The Impac o he Cu en Exchange Ra e Sys em on T ade and In la ion o Selec ed De eloping Membe Coun ies —P adumna Rana, Sep embe 1983 No. 19 Asian Ag icul u e in T ansi ion: Key Policy Issues —William James, Sep embe 1983 No. 20 The T ansi ion o an Indus ial Economy ECONOMIC STAFF PAPERS (ES) in Monsoon Asia —Ha y T. Oshima, Oc obe 1983 No. 21 The Signi icance o O -Fa m Employmen and Incomes in Pos -Wa Eas Asian G ow h —Ha y T. Oshima, Janua y 1984 No. 22 Income Dis ibu ion and Po e y in Selec ed Asian Coun ies —John Malcolm Dowling, J ., No embe 1984 No. 23 ASEAN Economies and ASEAN Economic Coope a ion —Na ongchai Ak asanee, No embe 1984 No. 24 Economic Analysis o Powe P ojec s —Ni in Desai, Janua y 1985 No. 25 Expo s and Economic G ow h in he Asian Region —P adumna Rana, Feb ua y 1985 No. 26 Pa e ns o Ex e nal Financing o DMCs —E. Go, May 1985 No. 27 Indus ial Technology De elopmen he Republic o Ko ea —S.Y. Lo, July 1985 No. 28 Risk Analysis and P ojec Selec ion: A Re iew o P ac ical Issues —J.K. Johnson, Augus 1985 No. 29 Rice in Indonesia: P ice Policy and Compa a i e Ad an age —I. Ali, Janua y 1986 No. 30 E ec s o Fo eign Capi al In lows on De eloping Coun ies o Asia —Jungsoo Lee, P adumna B. Rana, and Yoshihi o Iwasaki, Ap il 1986 No. 31 Economic Analysis o he En i onmen al Impac s o De elopmen P ojec s —John A. Dixon e al., EAPI, Eas -Wes Cen e , Augus 1986 No. 32 Science and Technology o De elopmen : Role o he Bank —Keda N. Kohli and I zal Ali, No embe 1986 No. 33 Sa elli e Remo e Sensing in he Asian and Paci ic Region —Mohan Sunda a Rajan, Decembe 1986 No. 34 Changes in he Expo Pa e ns o Asian and Paci ic De eloping Coun ies: An Empi ical O e iew —P adumna B. Rana, Janua y 1987 No. 35 Ag icul u al P ice Policy in Nepal —Ge ald C. Nelson, Ma ch 1987 No. 36 Implica ions o Falling P ima y Commodi y P ices o Ag icul u al S a egy in he Philippines —I zal Ali, Sep embe 1987 No. 37 De e mining I iga ion Cha ges: A F amewo k —P abhaka B. Gha e, Oc obe 1987 No. 38 The Role o Fe ilize Subsidies in Ag icul u al P oduc ion: A Re iew o Selec Issues —M.G. Quib ia, Oc obe 1987 No. 39 Domes ic Adjus men o Ex e nal Shocks in De eloping Asia —Jungsoo Lee, Oc obe 1987 No. 40 Imp o ing Domes ic Resou ce Mobiliza ion h ough Financial De elopmen : Indonesia —Philip E quiaga, No embe 1987 No. 41 Recen T ends and Issues on Fo eign Di ec In es men in Asian and Paci ic De eloping Coun ies —P.B. Rana, Ma ch 1988 No. 42 Manu ac u ed Expo s om he Philippines: A Sec o P o ile and an Agenda o Re o m —I. Ali, Sep embe 1988 No. 43 A F amewo k o E alua ing he Economic Bene i s o Powe P ojec s —I. Ali, Augus 1989 No. 44 P omo ion o Manu ac u ed Expo s in Pakis an 45 No. 1 Po e y in he People’s Republic o China: Recen De elopmen s and Scope o Bank Assis ance —K.H. Moinuddin, No embe 1992 No. 2 The Eas e n Islands o Indonesia: An O e iew o De elopmen Needs and Po en ial —B ien K. Pa kinson, Janua y 1993 No. 3 Ru al Ins i u ional Finance in Bangladesh and Nepal: Re iew and Agenda o Re o ms —A.H.M.N. Chowdhu y and Ma celia C. Ga cia, No embe 1993 No. 4 Fiscal De ici s and Cu en Accoun Imbalances o he Sou h Paci ic Coun ies: A Case S udy o Vanua u —T.K. Jaya aman, Decembe 1993 No. 5 Re o ms in he T ansi ional Economies o Asia —P adumna B. Rana, Decembe 1993 No. 6 En i onmen al Challenges in he People’s Republic o China and Scope o Bank Assis ance —Elisabe a Capannelli and Omka L. Sh es ha, Decembe 1993 No. 7 Sus ainable De elopmen En i onmen and Po e y Nexus —K.F. Jalal, Decembe 1993 No. 8 In e media e Se ices and Economic De elopmen : The Malaysian Example —Su anu Behu ia and Rahul Khulla , May 1994 No. 9 In e es Ra e De egula ion: A B ie Su ey o he Policy Issues and he Asian Expe ience —Ca los J. Glowe , July 1994 No. 10 Some Aspec s o Land Adminis a ion in Indonesia: Implica ions o Bank Ope a ions —Su anu Behu ia, July 1994 No. 11 Demog aphic and Socioeconomic De e minan s o Con acep i e Use among U ban Women in he Melanesian Coun ies in he Sou h Paci ic: A Case S udy o Po Vila Town in Vanua u —T.K. Jaya aman, Feb ua y 1995 No. 12 Managing De elopmen h ough Ins i u ion Building — Hil on L. Roo , Oc obe 1995 No. 13 G ow h, S uc u al Change, and Op imal Po e y In e en ions —Shiladi ya Cha e jee, No embe 1995 No. 14 P i a e In es men and Mac oeconomic En i onmen in he Sou h Paci ic Island Coun ies: A C oss-Coun y Analysis —T.K. Jaya aman, Oc obe 1996 No. 15 The Ru al-U ban T ansi ion in Vie Nam: Some Selec ed Issues —Sudip o Mundle and B ian Van A kadie, Oc obe 1997 No. 16 A New App oach o Se ing he Fu u e T anspo Agenda —Roge Allpo , Geo Key, and Cha les Melhuish June 1998 No. 17 Adjus men and Dis ibu ion: The Indian Expe ience —Sudip o Mundle and V.B. Tulasidha , June 1998 No. 18 Tax Re o ms in Vie Nam: A Selec i e Analysis —Sudip o Mundle, Decembe 1998 No. 19 Su ges and Vola ili y o P i a e Capi al Flows o Asian De eloping Coun ies: Implica ions o Mul ila e al De elopmen Banks —P adumna B. Rana, Decembe 1998 No. 20 The Millennium Round and he Asian Economies: An In oduc ion —Dilip K. Das, Oc obe 1999 No. 21 Occupa ional Seg ega ion and he Gende Ea nings Gap —Joseph E. Z eglich, J . and Yana an de Meulen Rodge s, Decembe 1999 No. 22 In o ma ion Technology: Nex Locomo i e o G ow h? —Dilip K. Das, June 2000 OCCASIONAL PAPERS (OP) —Jungsoo Lee and Yoshihi o Iwasaki, Sep embe 1989 No. 45 Educa ion and Labo Ma ke s in Indonesia: A Sec o Su ey —E nes o M. Pe nia and Da id N. Wilson, Sep embe 1989 No. 46 Indus ial Technology Capabili ies and Policies in Selec ed ADCs —Hi oshi Kakazu, June 1990 No. 47 Designing S a egies and Policies o Managing S uc u al Change in Asia —I zal Ali, June 1990 No. 48 The Comple ion o he Single Eu opean Communi y Ma ke in 1992: A Ten a i e Assessmen o i s Impac on Asian De eloping Coun ies —J.P. Ve bies and Min Tang, June 1991 No. 49 Economic Analysis o In es men in Powe Sys ems —I zal Ali, June 1991 No. 50 Ex e nal Finance and he Role o Mul ila e al Financial Ins i u ions in Sou h Asia: Changing Pa e ns, P ospec s, and Challenges —Jungsoo Lee, No embe 1991 No. 51 The Gende and Po e y Nexus: Issues and Policies —M.G. Quib ia, No embe 1993 No. 52 The Role o he S a e in Economic De elopmen : Theo y, he Eas Asian Expe ience, and he Malaysian Case —Jason B own, Decembe 1993 No. 53 The Economic Bene i s o Po able Wa e Supply P ojec s o Households in De eloping Coun ies —Dale Whi ing on and Venka eswa lu Swa na, Janua y 1994 No. 54 G ow h T iangles: Concep ual Issues and Ope a ional P oblems —Min Tang and Myo Than , Feb ua y 1994 No. 55 The Eme ging Global T ading En i onmen and De eloping Asia —A ind Panaga iya, M.G. Quib ia, and Na ha i Rao, July 1996 No. 56 Aspec s o U ban Wa e and Sani a ion in he Con ex o Rapid U baniza ion in De eloping Asia —E nes o M. Pe nia and S ella LF. Alabas o, Sep embe 1997 No. 57 Challenges o Asia’s T ade and En i onmen —Douglas H. B ooks, Janua y 1998 No. 58 Economic Analysis o Heal h Sec o P ojec s- A Re iew o Issues, Me hods, and App oaches —Ramesh Adhika i, Paul Ge le , and Anneli Lagman, Ma ch 1999 No. 59 The Asian C isis: An Al e na e View —Raji Kuma and Bibek Deb oy, July 1999 No. 60 Social Consequences o he Financial C isis in Asia —James C. Knowles, E nes o M. Pe nia, and Ma y Racelis, No embe 1999 46 No. 1 Es ima es o he To al Ex e nal Deb o he De eloping Membe Coun ies o ADB: 1981-1983 —I.P. Da id, Sep embe 1984 No. 2 Mul i a ia e S a is ical and G aphical Classi ica ion Techniques Applied o he P oblem o G ouping Coun ies —I.P. Da id and D.S. Maligalig, Ma ch 1985 No. 3 G oss Na ional P oduc (GNP) Measu emen Issues in Sou h Paci ic De eloping Membe Coun ies o ADB —S.G. Tiwa i, Sep embe 1985 No. 4 Es ima es o Compa able Sa ings in Selec ed DMCs —Hanan o Sigi , Decembe 1985 No. 5 Keeping Sample Su ey Design and Analysis Simple —I.P. Da id, Decembe 1985 No. 6 Ex e nal Deb Si ua ion in Asian De eloping Coun ies —I.P. Da id and Jungsoo Lee, Ma ch 1986 No. 7 S udy o GNP Measu emen Issues in he Sou h Paci ic De eloping Membe Coun ies. Pa I: Exis ing Na ional Accoun s o SPDMCs–Analysis o Me hodology and Applica ion o SNA Concep s —P. Hodgkinson, Oc obe 1986 No. 8 S udy o GNP Measu emen Issues in he Sou h Paci ic De eloping Membe Coun ies. Pa II: Fac o s A ec ing In e coun y Compa abili y o Pe Capi a GNP —P. Hodgkinson, Oc obe 1986 No. 9 Su ey o he Ex e nal Deb Si ua ion STATISTICAL REPORT SERIES (SR) in Asian De eloping Coun ies, 1985 —Jungsoo Lee and I.P. Da id, Ap il 1987 No. 10 A Su ey o he Ex e nal Deb Si ua ion in Asian De eloping Coun ies, 1986 —Jungsoo Lee and I.P. Da id, Ap il 1988 No. 11 Changing Pa e n o Financial Flows o Asian and Paci ic De eloping Coun ies —Jungsoo Lee and I.P. Da id, Ma ch 1989 No. 12 The S a e o Ag icul u al S a is ics in Sou heas Asia —I.P. Da id, Ma ch 1989 No. 13 A Su ey o he Ex e nal Deb Si ua ion in Asian and Paci ic De eloping Coun ies: 1987-1988 —Jungsoo Lee and I.P. Da id, July 1989 No. 14 A Su ey o he Ex e nal Deb Si ua ion in Asian and Paci ic De eloping Coun ies: 1988-1989 —Jungsoo Lee, May 1990 No. 15 A Su ey o he Ex e nal Deb Si ua ion in Asian and Paci ic De eloping Coun ies: 1989- 1992 —Min Tang, June 1991 No. 16 Recen T ends and P ospec s o Ex e nal Deb Si ua ion and Financial Flows o Asian and Paci ic De eloping Coun ies —Min Tang and Aludia Pa do, June 1992 No. 17 Pu chasing Powe Pa i y in Asian De eloping Coun ies: A Co-In eg a ion Tes —Min Tang and Ronald Q. Bu iong, Ap il 1994 No. 18 Capi al Flows o Asian and Paci ic De eloping Coun ies: Recen T ends and Fu u e P ospec s —Min Tang and James Villa ue e, Oc obe 1995 FROM OXFORD UNIVERSITY PRESS: Ox o d Uni e si y P ess (China) L d 18 h Floo , Wa wick House Eas Taikoo Place, 979 King’s Road Qua y Bay, Hong Kong Tel (852) 2516 3222 Fax (852) 2565 8491 E-mail: [email p o ec ed] Web: www.oupchina.com.hk 1. In o mal Finance: Some Findings om Asia P abhu Gha e e . al., 1992 $15.00 (pape back) 2. Mongolia: A Cen ally Planned Economy in T ansi ion Asian De elopmen Bank, 1992 $15.00 (pape back) 3. Ru al Po e y in Asia, P io i y Issues and Policy Op ions Edi ed by M.G. Quib ia, 1994 $25.00 (pape back) 4. G ow h T iangles in Asia: A New App oach o Regional Economic Coope a ion Edi ed by Myo Than , Min Tang, and Hi oshi Kakazu 1s ed., 1994 $36.00 (ha dbound) Re ised ed., 1998 $55.00 (ha dbound) 5. U ban Po e y in Asia: A Su ey o C i ical Issues Edi ed by E nes o Pe nia, 1994 $18.00 (pape back) 6. 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