Towards Inclusive Regional

Development in the Philippines:

Lessons, Challenges and
Policy Suggestions
20 August 2014, 8:30am-12:00nn
Malcolm Hall, University of the Philippines
Diliman, Quezon City
The Andrew Tan Lecture Series
present
a Forum and Roundtable Discussion
in cooperation with:
PRISME Strategies
About the Forum and Roundtable Discussion
T
he World Bank, in cooperation with the Angara Center for Law and
Economics, is undertaking a joint set of studies to identify the areas of
persistent underperformance and inequality in the Philippines. By reviewing
the differences in regional performance and their proximate causes, we hope
to pinpoint regions and areas where focused structural reforms can do the
most good for the nation.
The goal is to encourage balanced and inclusive growth that will come from
reforms that remedy long-standing problems that impede progress. These
include understanding what are the sources of uneven performance in different
areas in the Philippines, how labor markets respond to existing constraints,
why catch up is difficult, and what possible areas of improvement in the capital
and land markets might aid in promoting both equity and efficiency.
We want to see how much or how little progress has been made in closing
the rural urban income gaps and also the gaps between the leading central
areas and other regions of the Philippines. In addition, we pay close attention
to the political economy of institutions at the regional level to see how local
politics limits equilibrating market forces and makes local people indebted to
their political patrons. Teams of economists combining leading researchers
from the Philippines and abroad will present the first set of technical estimates
which will then allow us to formulate actionable policy initiatives that draw
upon their findings.
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To that end, the following three studies seek to:
1) establish the extent of disparities between regions
2) examine the response of labor markets to existing institutions and
identify lack of convergence, and
3) discuss how political institutions, such as political dynasties limit the
scope of reform or distort the outcomes of economic policies and slow
progress
Skoufias and Vinha examine Welfare Disparities in the Philippines. They
identify the regions of welfare inequality and ask how much of this is due to
underlying characteristics of individuals and how much due to other factors.
They try to see whether fiscal transfers are properly targeted to appropriate
regions and recipients.
Chua, Limkin, Nye, and Williamson in Urban-Rural Income and Wage Gaps
in the Philippines: Measurement Error, Unequal Endowments, or Market
Failure review where changes in regional wage gaps have occurred over
the last 20 years and try to see how much of a role the labor market played
in promoting those gaps.
Querubin and Robinson in Why Regions Fail: The Case of the Philippines,
look at the nature of institutional differences between different regions of the
country to identify which factors impede growth and development beyond
simple poverty or infrastructure. They particularly point to the importance
of regional power blocs and political dynasties as distorting incentives for
growth.
Overall, by thinking of the Philippine reform within the framework of these
three papers, we can consider how reform choices can best be structured to
promote greater productivity and wider inclusiveness, while pulling back or
retargeting ineffective efforts.
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4
T
he World Bank Groups new country assistance strategy for the Philippines from
2015 to 2018 revolves around the theme Making Growth Work for the Poor.
This means making sure no one, especially the poor, is left behind. Households and
communities most at risk for poverty should have better income opportunities and less
vulnerability to sudden economic diffculties and natural disasters. They should have
better education, good health care, as well as access to infrastructure and information
to improve their lives and to participate in growing the economy.
The new strategy is in line with the World Bank Groups new twin goals of eradicating
extreme poverty and promoting shared prosperity. It also supports the countrys
goal of promoting and sustaining inclusive growth that reduces poverty and creates
more and better jobsjobs that raise real wages or bring people out of poverty.
F
ormally launched in 2012, the Angara Centre for Law and Economics is the frst and
only Philippine policy and academic think tank dedicated to the scientifc analysis
and international assessment of Philippine and regional legislation, policies and public
sector programs.
The Centre seeks to professionalize the science of government legislation and policy-
making, by drawing from the best of the growing ranks of internationally-trained
Philippine scholars, and enabling them to continue academic and policy research
according to the rigors of international standards.
It serves as a forum for continuing analysis, recommendations and information
dissemination between and among public and private sector economists, lawyers,
academics, and policy-makers from the Philippines and abroad.
About
The challenge remains to create these new opportunities for some 10 million
unemployed and underemployed Filipinos as of 2012, including 1.1 million individuals
who expect to enter the labor force every year.
The new strategy continues to support the countrys development programs in fve
key engagement areas:
Transparent and accountable governance: strengthening public fnancial
management, improving fscal transparency and fnancial accountability, and
supporting greater demand from citizens for government accountability.
Empowerment of the poor and vulnerable: improving health and education
outcomes, strengthening social protection and ensuring the availability of more
timely and improved measurements of poverty.
Rapid, inclusive and sustained economic growth: promoting economic policy
reform for inclusive growth, boosting private sector development by improving
the investment climate for frms of all sizes, including greater access to fnance,
and increasing productivity and job creation, especially in rural areas.
Climate change, environment, and disaster risk management: increasing
physical, fnancial and institutional resilience to natural disaster and climate
change impacts, and improving natural resource management and sustainable
development.
Peace, institution building, and social and economic opportunity: supporting
social and economic development in confict-affected regions in Mindanao,
including the Bangsamoro.
The indicative new fnancial commitment from IBRD may average $800 million a year,
along with non-lending support in the form of analytical and advisory assistance.
IFC has committed $250-$300 million in investments in the next couple of years.
As of January 2014, the Philippines portfolio comprises 18 active projects with a total
net commitment of $2.9 billion. This includes 13 investment loan operations and fve
trust funds that are part of the lending portfolio.
5
About
6
Messages
S
enator Edgardo J. Angara recently
concluded over two decades of
distinguished service as a Philippine
legislator.
Angara led the enactment of landmark
legislation on agriculture, education,
health, arts and culture, science and
technology, good governance, fnancial
reforms, and social welfare. These
include the Free High School Act, creation
of CHED and TESDA, Government
Assistance to Students and Teachers
in Private Education (GASTPE),
PhilHealth Act, Senior Citizens Act, the
National Cultural Heritage Law, creation
of the National Museum, the National
Commission on Culture and the Arts
(NCCA), and many others.
He also pushed for the creation of the Congressional Commission on Science,
Techonology and Engineering (COMSTE) to study the root of the countrys waning
competitiveness and lay down the grounds for improvement and innovation.
A former President of the University of the Philippines, Angara was the driving force,
along with Justice Antonio Carpio, behind the creation of the UP Institute for Maritime
Affairs and Law of the Sea (UP-IMLOS), a highly specialized academic research
institution devoted to maritime affairs.
He has also been active in the international relations front, having been responsible for
successfully rekindling the Philippiness relations with Spain through the Philippine-
Spanish Friendship Day Act.
Apart from being a legislator, Angara also served government in various functions as
chairman of the Congressional Commission on Education (CHED), Secretary of the
Department of Agriculture, Chairman of the Philippine National Bank, and Executive
Secretary.
7
R
oger van den Brink is the
Lead Economist and Program
Leader of the Macroeconomics
and Fiscal Management Global
Practice of the World Bank Group
in the Philippines. He has been with
the World Bank since 1992. Prior
to this assignment, he also served
as Lead Economist for Mongolia.
Before joining the East Asia
Region, he held various positions
in the Africa Region, including
Senior Country Economist in
South Africa, Deputy Resident
Representative in Zimbabwe,
and Special Assistant to the Vice
Presidents.
He holds a Ph.D. in Agricultural Economics from the University of Wisconsin-
Madison in the US, and a Masters degree in Sociology from Wageningen University
in the Netherlands. Before joining the World Bank, he was a Research Associate at
Cornell University and an Associate Expert with the Ministry of Foreign Affairs of the
Netherlands in Burkina Faso.
His academic publications include Economic Policy and Household Welfare During
Crisis and Adjustment in Tanzania (New York University Press, 1993); and The
Economics of Cain and Abel in The Journal of Development Studies, Vol. 31, No.
3, February 1995, which was awarded the Dudley Seers Memorial Prize for the best
written article in The Journal of Development Studies in 1995.
On land reform, his publications include: Agricultural Land Redistribution: Toward
Greater Consensus (International Bank for Reconstruction and Development:
Washington DC, 2009); In Search of Land and Housing in the New South Africa:
the Case of Ethembalethu (World Bank, Washington DC: 2008), and Consensus,
Confusion and Controversy: Selected Land Reform Issues in Sub-Saharan Africa
(World Bank, Washington D.C., 2005).
Messages
8
E
mmanuel Skuofas is a Lead
Economist at the Poverty Reduction
Group of the World Bank. He specializes
in impact evaluation, targeting, poverty
measurement, urban and rural labor
markets, land tenancy issues, and the
role of risk mitigation and insurance in
poverty alleviation. Other experience at
the Bank includes a senior appointment
at the Poverty and Gender Group in the
Latin American and Carribean Region.
Prior to joining the Bank, Emmanuel
worked at the Research Department of
the Inter-American Development Bank
(IDB) and at the International Food Policy
Research Institute (IFPRI). He earned his
Ph.D. in Economics from the University of
Minnesota (1988) and his B.A. degree in
Economics from the University of California
at Berkeley (1981).
S
haron Faye Piza is a Consultant for the World Banks East Asia and the Pacifc
Poverty Reduction and Economic Management Department, and the South East
Asia Regional Department of the Asian Development Bank. She concurrently holds a
position as Treasurer of the Board of Directors, and Research Fellow, of the Asia-Pacifc
Policy Center. Her research interests are regional development, poverty, migration, and
agriculture.
WELFARE DISPARITIES IN THE PHILIPPINES
Authors: Emmanuel Skuofas, Sharon Faye Piza, Nobuhiko Fuwa, and Katja Vinha
Presenter: Emmanuel Skuofas
Skoufas, Piza, Fuwa and Vinha identify the regions of welfare inequality and ask how
much of this is due to underlying characteristics of individuals and how much due to
other factors. They try to see whether fscal transfers are properly targeted to appropriate
regions and recipients.
Abstract of Presentation
Prior to this, she has had extensive experience in both policy and research work, holding
various positions at the Food and Agriculture Organization of the United Nations (FAO),
the Department of Agriculture of the Philippines, and the UPecon Foundation.
Ms. Piza received her B.S. Statistics and her M.A. Economics from the University of
the Philippines in Diliman.
N
obuhiko Fuwa is a Professor
of Development Economics at
Graduate School of Asia-Pacifc
Studies, Waseda University, Tokyo.
He received his Ph.D. in Agricultural
and Resource Economics (1995)
from the University of California at
Berkeley.
His research interests include rural
and agricultural development,
poverty, and gender. Earlier he
has worked at the World Bank in
Washington DC and International
Rice Research Institute in Los Banos.
K
atja Vinha holds a doctorate in agricultural and resource economics from the
University of Maryland, College Park. Her dissertation examined the effects of the
Washington Metro on development patterns. Her recent studies have looked at the
impacts of weather shocks on welfare in rural Mexico, and her past research spans
from the effects of transportation networks on location decisions to land reform. She
has worked as an assistant professor of economics at the Universidad de los Andes in
Bogot, Colombia, and as a consultant for the World Bank.
9
D
r. Karl Kendrick Chua is country
economist of the World Bank for the
Philippines. His work focuses on tax policy
and administration, public expenditure
management, macroeconomic management,
and statistical development. Chua completed
his MA in economics in 2003 and PhD in
economics in 2011 at the University of the
Philippines School of Economics. Prior to
joining the World Bank, he was lecturer of
mathematics and economics at the Ateneo
de Manila University and was consultant
for several local and donor-funded projects.
He also trained as a systems analyst in
Andersen Consulting. His current research
interests include the political economy of tax
reform and local government fscal capacity.
10
URBAN INCOME AND WAGE GAPS IN THE PHILIPPINES:
Measurement Error, Unequal Endowments, or Market Failure
Authors: Karl Kendrick Chua, Joseph Louie Limkin, John Nye, and Jeffrey Williamson
Presenter: John Nye
Abstract of Presentation
Income inequality is higher in the Philippines than in most of its Asian neighbors, and
spatial inequality accounts for a fairly large share of it. Individual attributes of workers
and households explain the majority of the urban-rural gaps, and schooling, skill, and
experience are the three individual characteristics that matter most. Provincial variables
like typhoon incidence, government corruption, school crowding, and access to health
facilities matter far less. Workers born in the cities and immigrants to the cities invest more
in human capital than do rural workers, but this paper cannot tell us how much of that is
due to better human-capital-building infrastructure supply in the cities and how much is
due to higher urban demand for that infrastructure, and if the latter how much is due to
market incentive. There is little evidence of labor market failure in the Philippines since,
when properly measured, wage gaps by skill level are modest. Unequal endowments
account for most of the urban-rural income gaps.
11
D
r. John Nye holds the Frederic
Bastiat Chair in Political Economy
at the Mercatus Center at George
Mason University and is Research
Director at the Higher School of
Economics, Moscow. His primary
research interests include European
economic history and new institutional
economics.
He is a founding member of the
International Society for the New
Institutional Economics and has been
on the editorial board of the Journal of
Economic History. He was co-editor
of Frontiers in the New Institutional
Economics. His articles have been
published in a variety of journals.
J
oseph Louie Limkin is a Research
Analyst at the Poverty Reduction
and Economic Management (PREM)
unit, World Bank Offce Manila
(WBOM). He completed his degree
in Management Economics from
Ateneo de Manila in 2008, and
received his M.A. in Economics from
the UP School of Economics in 2010.
Prior to his engagement with WBOM,
he worked for the ADB and a USAID
funded health project.
12
WHY REGIONS FAIL: The Case of the Philippines
Authors: Pablo Querubin and James Robinson
Presenter: James Robinson
In this paper we investigate the institutional determinants of regional inequality in
the Philippines. We emphasize how political institutions shape regional inequality
through various channels: the dominance of political dynasties which leads to a lack of
accountability and a non-pluralistic society; the weakness and absence of the national
state which mani- fests itself in violence and warlordism. This weakness creates and is
sustained by problems of illegitimacy in parts of the country, such as Mindanao, which are
distinct culturally and historically have only been incorporated relatively recently into the
polity. We also show that land inequality plays a relatively separate role in determining
poverty and public policy with higher land inequality be strongly associated with better
development and public goods out- comes. We argue however, that this likely captures
the indirect impact of land inequality working via the political system in a situation with
political institutions which are extractive in many ways.
Abstract of Presentation
J
effrey Williamson is Laird
Bell Professor of Economics,
emeritus, Harvard University,
Honorary Fellow, Department of
Economics, University of Wisconsin-
Madison, and Adjunct Professor,
University of the Philippines, School
of Economics. President of the
Economic History Association (1994-
1995), Chairman of the Harvard
Economics Department (1997-
2000), and Master of Harvards
Mather House (1986-1993), his
most recent books are: Cambridge
Economic History of Capitalism
(2014), Trade and Poverty: When
the Third World Fell Behind (2011);
Globalization and the Poor Periphery
before 1950 (2006); and Global
Migration and the World Economy
(2005).
13
D
r. Pablo Querubin is Assistant
Professor of Politics and Economics
at New York University. He received his
Ph.D. in Economics (2010) from the
Massachusetts Institute of Technology.
His areas of research include political
economy, development economics, elites,
economic and political institutions, as
well as economic history. He received
the Outstanding Teaching Award from
the Sloan School of Management of MIT
in 2008. He also had a brief stint from
2011-2012 as Visiting Professor at the
Universidad de los Andes in his native
country Colombia.
D
r. James Robinson is
David Florence Professor of
Government at Harvard University
and a faculty associate at the
Institute for Quantitative Social
Science and the Weatherhead
Center for International Affairs. He
studied economics at the London
School of Economics, the University
of Warwick and Yale University. He
previously taught in the Department
of Economics at the University
of Melbourne, the University of
Southern California and before
moving to Harvard was a Professor
in the Departments of Economics and Political Science at the University of California
at Berkeley. His main research interests are in comparative economic and political
development with a focus on the long-run with a particular interest in Latin America and
Sub-Saharan Africa. He is currently conducting research in the Democratic Republic of
the Congo, Sierra Leone, Haiti and in Colombia where he has taught for many years
during the summer at the University of the Andes in Bogot.

Professor Robinson is a member of the Canadian Institute for Advanced Researchs
program on Institutions, Organizations and Growth.
14
D
r. Gerardo P. Sicat
is the countrys frst
Director-General of
the National Economic
Development Authority,
serving as its head from
1972 to 1980. Remaining
as the countrys foremost
economist, he also later
worked for the creation
of the Philippine Institute
for Development Studies
(PIDS) and Philippine
Center for Economic
Development (PCED). Dr.
Sicat is currently Professor
Emeritus of the University
of the Philippines School
of Economics and is
a renowned scholar
and author of many
economic books and textbooks. He is a graduate of the UP School of Economics and
the Massachusetts Institute of Technology. He is also a recipient of a grant from the
Rockefeller Foundation and the UP President Edgardo J. Angara (PEJA) Fellowship.
ROUNDTABLE DISCUSSION
Panel Discussant: Gerardo Sicat
15
T
his event is the second of a series of roundtable discussions organized by the
Angara Centre under the Andrew Tan Lecture Series, named after the Centres
frst patron.
Dr. Andrew Tan is the
founder, chairman of the
board, and president of
Megaworld Corporation
since 1989. He has
achieved remarkable
success in the real estate,
food and beverage industry,
and hotel industries. He
currently sits in the board
of numerous corporations
that have made their mark
locally and internationally.
Both government and civil
society have recognized
Dr. Tans contribution.
The City of Taguig in April
2005 conferred on him the
Forward Taguig Award in
the Field of Business and
Entrepreneurship. The
Quezon City government
named Mr. Tan
Businessman of the Year
in 2004, in recognition of
his effort in transforming Eastwood City into a magnet for investments and one of the
most dynamic growth centers in the city.
Apart from being a brilliant entrepreneur, Dr. Tan is a philanthropist whose contribution
provided the seed fund for the successful launch of the Angara Center for Law and
Economics in 2012.
About the Sponsor
The Andrew Tan Lecture Series
P R O G R A M M E
Messages from:
Edgardo Angara
Former Senator and Founder, Angara Centre for Law and Economics
Rogier van den Brink
Lead Economist and Program Leader, Macroeconomics and Fiscal Management
Global Practice, World Bank Group
Registration
Health Break
Roundtable Discussion
Panel Discussant: Dr. Gerardo Sicat
Open Forum
Presentations:
Welfare Disparities in the Philippines
Authors: Emmanuel Skoufas, Sharon Faye Piza, Nobuhiko Fuwa, and Katja Vinha
Presenter: Emmanuel Skoufas
Discussion Points:
Identifying the regions of welfare inequality: to what extent is inequality due to the
underlying characteristics of individuals, and how much is accounted for by other
factors?
Are fscal transfers properly targeted to appropriate regions and recipients?
Urban-Rural Income and Wage Gaps in the Philippines:
Measurement Error, Unequal Endowments, or Market Failure
Authors: Karl Kendrick Chua, Joseph Louie Limkin, John Nye, and Jeffrey Williamson
Presenter: John Nye
Discussion points:
Changes in urban-regional wage gaps over the last 20 years: how much of a role
does the labor market play in promoting these gaps?
The labor markets adjustment to existing rigidities while preserving regional
inequality: which failures of endowment (such as health and human capital) or
structural rigidities (such as in the capital or labor markets) need more attention and
analysis?
Why Regions Fail: The Case of the Philippines
Authors: Pablo Querubin and James Robinson
Presenter: James Robinson
Discussion points:
The nature of institutional differences across regions of the Philippines: which
factors impede growth and development beyond simple poverty or infrastructure?
The importance of regional power blocs and political dynasties as distorting
incentives for growth;
The lack of strong central state presence in much of the country as a source of
continuing violence and lawlessness; and
The poor provision of most basic functions of the government, limiting the impact of
policies that could promote economic growth.
09:00 - 09:05 am
09:05 - 09:10 am
08:30 - 09:00 am
10:55 - 11:20 am
11:20 - 12:00 pm
09:10 - 09:40 am
09:40 - 10:10 am
10:10 - 10:55 am
ANGARA CENTRE FOR LAW AND ECONOMICS
Towards Inclusive Regional Development in the Philippines:
Lessons, Challenges and Policy Suggestions
August 20, 2014, 8:30 am - 12:00 nn, Malcolm Hall, UP Diliman, Quezon City
Moderator: Ms. Betsy Enriquez