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14 - An Essay on Markets, Distributive Justice and Social Safety Nets
- Edited by Hal Hill, Australian National University, Canberra, Majah-Leah V. Ravago, Ateneo de Manila University, James A. Roumasset, University of Hawaii, Manoa
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- Book:
- Pro-poor Development Policies
- Published by:
- ISEAS–Yusof Ishak Institute
- Published online:
- 09 January 2024
- Print publication:
- 10 June 2022, pp 361-389
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Summary
INTRODUCTION AND OVERVIEW
I am delighted to contribute to this Festschrift in honour of Dr. Arsenio M. Balisacan, a professor of economics and colleague at the UP School of Economics, who has reached the mandatory retirement age in government. He was appointed on special detail in 2012 and served up to 2016 as director-general of the National Economic and Development Authority (NEDA) and concurrent secretary of socio-economic planning in the President’s Cabinet. As a professor, Dr. Balisacan has made important contributions to understanding poverty and income inequality in the Philippines. During his tenure at NEDA, he coordinated the preparation of the medium-term Philippine Development Plan (PDP), which has inclusive growth as theme—essentially, sustained and broad‑based economic growth. This is a timely opportunity for me to visit and explore the current challenge of growth with high income inequality and some rising episodes of such inequality in the country.
The post-World War II economic history of the Philippines shows that the real gross domestic product (GDP, adjusted for inflation) expanded about 34.4 times between 1946 and 2016—an annual real GDP growth rate of about 5.4 per cent. The GDP expansion was accompanied by high and, in some years, increasing income inequality, however. For instance, the Gini index was 0.44 in 2015 and worsened to nearly 0.48 in 2018. The basic data come from the Family Income and Expenditure Survey (FIES), which the Philippine Statistics Authority (PSA) collects and releases every three years.
Growth with high income inequality has long been a concern of the Philippine government under a succession of administrations since 1986. The inequality problem persists amid a variety of policy interventions geared towards inclusive growth. By no means has the problem been solved at this point. Is there something the Philippines can do to arrest growth with high income inequality, often decried as lack of distributive justice?
Several economists view lack of distributive justice as the result mainly of unequal distribution of initial endowments, which a market system tends to replicate across time. And so instead of interfering with the workings of markets, many economists counsel collective actions designed to correct the inequitable distribution of initial endowments.
1 - Introduction
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- By Dante B. Canlas, University of the Philippines, Muhammad Ehsan Khan, ADB's Economics and Research Department, Juzhong Zhuang, ADB's Economics and Research Department
- Edited by Dante Canlas, Muhammad Khan, Juzhong Zhuang
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- Book:
- Diagnosing the Philippine Economy
- Published by:
- Anthem Press
- Published online:
- 05 March 2012
- Print publication:
- 01 August 2009, pp 1-10
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Objectives
The Philippines' economic growth during the past five decades has not been impressive compared with that of many of its neighbors; in per capita terms, the growth was even less favorable. As a result, the pace of poverty reduction has been slow, and income inequality remains high. In 2006, about one in four Philippine families and 32.9% of the population were deemed poor, and the Gini coefficient of per capita income was slightly over 45%, among the highest in Southeast Asia.
The Philippine Government is committed to sustained growth, the rewards from which are within reach of every Filipino. The commitment is spelled out in the current Medium-Term Philippine Development Plan.
This book presents the work undertaken for the Philippine country diagnostic study under the Asian Development Bank regional technical assistance project, Strengthening Country Diagnosis and Analysis of Binding Development Constraints in Selected Developing Member Countries. A summary of the findings was published in Philippines: Critical Development Constraints (ADB 2008). This book presents more in-depth work on the various aspects of the Philippine economy and the constraints that curtail its effort to grow and tackle poverty. The discussions in the book will help improve the understanding of the Philippine economy and the challenges that the policy makers face. It will be of value to people who have been following the developments in the region and the Philippines.
Methodology
The study adopts a diagnostic approach and broadly follows growth diagnostics developed by Hausmann, Rodrik, and Velasco (2005).
3 - Critical Constraints to Growth and Poverty Reduction
- from Part A - Overview and Synthesis
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- By Dante B. Canlas, University of the Philippines, Muhammad Ehsan Khan, ADB's Economics and Research Department, Juzhong Zhuang, ADB's Economics and Research Department
- Edited by Dante Canlas, Muhammad Khan, Juzhong Zhuang
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- Book:
- Diagnosing the Philippine Economy
- Published by:
- Anthem Press
- Published online:
- 05 March 2012
- Print publication:
- 01 August 2009, pp 33-98
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Summary
The Philippines, under a succession of administrations since 1986, has been committed to sustained growth of income and employment, stable prices, poverty eradication, and improved distribution of income and wealth in an open economy setting. In pursuit of these development goals, the national and local governments have ushered in wide-ranging economic and social policy reform programs. Under the reform programs, real gross domestic product (GDP) doubled between 1986 and 2006—a growth rate of about 3.5% each year. However, this pace of growth leaves much to be desired when compared with that of many of the Philippines' East and Southeast Asian neighbors. In recent years, growth has picked up and in 2007 real GDP grew at 7.2%. But there is no room for complacency. Private investment remains weak, raising the question of whether the current pace of growth is sustainable. In 2006, about 26.9% of families and 32.9% of the population still lived in poverty, a reminder of the difficulties that many individuals are still going through. And inequality in the distribution of household incomes remains high by regional standards.
Moving forward, the challenge for the Philippines is to sustain the current pace of growth or even accelerate it, while making every Filipino a winner in the growth process. To meet this challenge, a key step is to identify the most critical factors that constrain growth and poverty reduction. The diagnostic approach this study adopted to identify the critical constraints is informed by basic insights from recent literature that seeks to account for international differences in the levels and growth rates of per capita income.
2 - Development Performance and Policy
- from Part A - Overview and Synthesis
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- By Dante B. Canlas, University of the Philippines, Maria Rowena M. Cham, Power Sector Asset and Liabilities Management (PSALM) Corporation, Juzhong Zhuang, ADB's Economics and Research Department.
- Edited by Dante Canlas, Muhammad Khan, Juzhong Zhuang
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- Book:
- Diagnosing the Philippine Economy
- Published by:
- Anthem Press
- Published online:
- 05 March 2012
- Print publication:
- 01 August 2009, pp 13-32
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Summary
The Philippine experience after World War II, relative to that of other countries in East and Southeast Asia, has caught the attention of eminent economists studying growth and development. Lucas (1993), for example, asked why the Philippines was not part of the “economic miracle”–the remarkable East Asian transformation featuring Hong Kong, China; the Republic of Korea; Singapore; and Taipei, China. This section describes and tries to account for performance in growth and poverty reduction in the past several decades and the evolution of the Philippine Government's development policy.
Synopsis of Philippine Growth
Following the Philippines' political independence in 1946, in the 1950s, the country embarked on an industrialization drive. During 1950–2006, the Philippine gross domestic product (GDP), expressed in 1985 prices, expanded 11.2 times—an average growth of 4.4% each year. But the growth rate was never smooth. For instance, the economy contracted in 1984–1985, 1990, and 1998.
Accounting for growth in population—which rose from about 19 million in 1950 to 87 million in 2006, for an average annual growth of about 2.75%—in 1960 the Philippines had a per capita GDP of about $612 expressed in 2000 United States (US) dollars (Table 2.1). By this measure, it was ahead of Indonesia, with a per capita income of $196, and Thailand, with $329. The Philippines trailed Hong Kong, China; the Republic of Korea; Malaysia; Singapore; and Taipei, China. By 1984, Thailand's per capita GDP of $933 had overtaken the Philippines' $908.
Preface
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- By Dante B. Canlas, University of the Philippines Diliman, Muhammad Ehsan Khan, ADB's Economics and Research Department, Juzhong Zhuang, ADB's Economics and Research Department
- Edited by Dante Canlas, Muhammad Khan, Juzhong Zhuang
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- Book:
- Diagnosing the Philippine Economy
- Published by:
- Anthem Press
- Published online:
- 05 March 2012
- Print publication:
- 01 August 2009, pp v-vii
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Summary
The Philippines has long considered sustained growth of income and employment, along with poverty reduction and improved distribution of income and wealth, as major development goals. In pursuit of these goals, the country embarked on an industrialization drive after gaining political independence more than a half century ago. The drive continues today. The primary strategy involves transforming an economy that still has a large agriculture sector into an industrialized one. Through this strategy, policy makers aim to move individuals, households, and enterprises from low- to high-productivity sectors and activities to trigger and propagate the desired economic and social transformation.
A look at the Philippines' development performance over the past six decades, however, indicates that the country has not done as impressively as many of its East and Southeast Asian neighbors, such as Malaysia, Thailand, and the four newly industrialized economies—Hong Kong, China; the Republic of Korea; Singapore; and Taipei, China. Philippine economic growth has not only been slower, it has also been interrupted frequently by episodes of macroeconomic instability, financial and fiscal crises, and recessions. In the 1950s and 1960s, the Philippines had one of the highest per capita gross domestic products (GDPs) in the region—higher than the People's Republic of China, Indonesia, and Thailand. But, the country has now fallen behind. As a result, household incomes have not risen significantly, poverty incidence has declined only slowly, and inequality remains high. In 2006, about one in every four families and one in every three Filipinos lived below the official poverty lines.