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Thursday, June 30, 2011

The Strange and Distorted Philippine Labor Market

Yet some clues to the problems facing Philippine industry may be gleaned from work by Philippine labor specialists. For example, despite the higher productivity in the urban industrial sector and the need for highly skilled workers, the unemployment rate is higher for college-educated students than less educated workers. In 2008, the college-educated had a 10.6 percent unemployment rate compared to 8.6 percent for those with only high school degrees, 3.3 percent for those with elementary education, and 2.1 percent for those with no elementary schooling at all. This is so much the opposite of what is typical in the developed economies that it suggests the importance of high barriers to entry in the formal job market that are not binding in the low-wage, heavily informal service and agricultural sectors that are more likely to employ the least educated. 
Esguerra (2010) points to two features of Philippine industry that would dramatically inhibit job creation: (i) a high industrial minimum wage and (ii) strict employment protection
As is well known, competition and investment are hampered by constitutional rules that limit foreign participation in local business to minority status and that prohibit foreigners from owning property with a few limited exceptions such as inheritance. This severely restricts the entry of firms with the greatest knowhow and managerial experience that would benefit the Philippine economy.
It is not a surprise that skilled workers are among the Philippines’s largest exports. Overseas workers on a variety of temporary assignments cannot find employment in their home country because enterprises are heavily constrained in their ability to enter. It is simpler to hire Filipinos abroad than at home with predictable costs for growth and developmental progress...
Despite the clear and glaring problems that these and other distortions represent, what are two of the most highly promoted reforms often suggested for the Philippines? Tax collection (or fiscal reform) and infrastructure development.
The last, is a very good question.

This, from a thoughtful new ADB paper by John Nye about labor market rigidities in the Philippines. My former boss, Michael Clemens, describes Nye as a "hyper-brilliant guy, an extremely impressive intellect."

This is a paper I wish my friends in government will read, despite its length. You may disagree with the specific policy implications, but I believe it gives an accurate assessment of the problems facing the Philippine economy that no one is saying.

Sunday, June 26, 2011

Should we take the Freedom of Information Act More Seriously?

Recent empirical evidence from India suggests that we should:
In this randomized field experiment we observe urban slum dwellers of New Delhi, the capital of India, apply for ration cards at the local offices of the Food and Civil Supplies Department. The ration card entitles the holder to subsidized foodstuffs and is the cornerstone of India’s minimal welfare state. To measure the benefit derived from paying a bribe and the effectiveness of an anti-corruption intervention we compare the length of time lapsed before a ration card is issued for confederates randomized into a control group and three treatments—bribepayment, FOI [freedom of information] application, and NGO support.
The findings from the field experiment are striking in their clarity. Only confederates randomly assigned to the bribe and local freedom of information law interventions received ration cards within the experimental time frame of seven and a half months. The maximum legally mandated period during which ration cards must be issued is forty-five days. The fastest way to secure a ration card is through bribery. The FOI treatment is only a little less effective than the graft intervention. NGO support seems to be completely ineffectual in helping the urban poor to secure ration cards
The highlights are mine. The paper is forthcoming in the Journal of Law and Economics. An outdated draft version is here.

HT to Chris Blattman

Thursday, June 23, 2011

Just as Beautiful. Just not as Expensive.

Brilliant new ad from the Department of Tourism. It oozes cocky-smart. This one's a hundred times better than that failed "Pilipinas Kay Ganda" slogan from months ago. I can almost imagine a whole series of these coming out. They're a bit controversial, but it's time we, as a country, showed some balls for a change.

HT to Jayvee Fernandez

Wednesday, June 15, 2011

An Undersupply of Physicians?

Here's a follow up on my previous post on keeping medicine and health students in the country. Some might say my argument relies heavily on nurses while what U.P. is trying to do is stem the tide of migrating physicians.

But here's the data on physicians per 1000 people. I hardly think our 1.2 physicians per 1000 people constitutes an undersupply, given that we have a higher number than Thailand, India, and some comparable countries. But I'm no expert so  I'll let health practitioners comment on whether the number for the Philippines is sub-optimal or not.

The data is from the World Development Indicators. The latest year for the Philippines is 2004. Not all countries have a data point in this year so they have been dropped.

Thursday, June 9, 2011

On What Makes a Top University

A survey of living MIT alumni found that they have formed 25,800 companies, employing more than three million people including about a quarter of the workforce of Silicon Valley. Those firms between them generate global revenues of about $1.9tn (£1.2tn) a year. If MIT was a country, it would have the 11th highest GDP of any nation in the world.
The full article, which talks about the university's 150th anniversary, is here.

In other news, my alma mater, the Ateneo de Manila University celebrates being the first in the Philippines to receive Institutional Accreditation and Level IV Reaccredited status by the Federation of Accrediting Agencies of the Philippines (FAAP). There is a ton to rejoice about of course. It confirms that we are a top school in the country.

But a voice in my head also asks: but how many entrepreneurs has the university produced? How many jobs has the school created through its students?

One looks at top schools like Harvard, MIT, etc. and the people here have a totally different mindset from the folk at usual universities. Watch the Social Network. While people do not talk that way as they do in the movie, the film captures the culture accurately: the goal is always to come up with the next new idea, to create the next new job.

Unfortunately, I still do not quite see this in the Ateneo. It reminds me that despite the awards, we are still far, very far, from being a truly top school. There's no room for complacency.

Sunday, June 5, 2011

Legalize Bribe Giving to Reduce Bribery?

A novel idea from Kaushik Basu, India's current chief economic adviser. The full paper is here; the WSJ article here.
There are different kinds of bribes and what this paper is concerned with are bribes that people often have to give to get what they are legally entitled to. I shall call these harassment bribes. Suppose an income tax refund is held back from a taxpayer till he pays some cash to the officer. Suppose government allots subsidized land to a person but when the person goes to get her paperwork done and receive documents for this land, she is asked to pay a hefty bribe... 
The central message of this paper is that we should declare the act of giving a bribe in all such cases as legitimate activity. In other words the giver of a harassment bribe [not the demander] should have full immunity from any punitive action by the state. 
It is argued that this will cause a sharp decline in the incidence of bribery. The reasoning is that once the law is altered in this manner, after the act of bribery is committed, the interests of the bribe giver and the bribe taker will be at divergence. The bribe giver will be willing to cooperate in getting the bribe taker caught. Knowing that this will happen, the bribe taker will be deterred from taking a bribe. 
Sounds to me like this is a policy we can experiment on and see if it works. At the very least, it's worth a try.

HT to Marginal Revolution.

Saturday, June 4, 2011

The Urban Poverty Paradox

This is the second time I'm quoting "The Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier" because the book is simply composed of many little sharable insights. This one's a good note for city planners: providing expanded public services must not only take into account current under-capacity, but must anticipate the under-capacity generated by the public service as well.
The great urban poverty paradox is that if a city improves life for poor people currently living there by improving public schools or mass transit, that city will attract more poor people... 
Cities aren’t full of poor people because cities make people poor, but because cities attract poor people with the prospect of improving their lot in life... 
Indeed, we should worry more about places with too little poverty. Why do they fail to attract the least fortunate?
Of course, it's better to read the book to see the full argument.

Wednesday, June 1, 2011

Fees for Plastic Bags: Make it a Peso Per, Please

It's a long shot to claim that this bill on charging fees for plastic bags was influenced by my recent blog post, but I'd still like to take credit for it, however imaginary, as an ego boost.
The bill, also known as the "Plastic Bag Use Disincentive Act of 2011", will require big stores, food chains and similar establishments to charge their customers not less than P5 per plastic bag, regardless of size when buying items or products.
This is a fabulous idea and I've seen it work well in DC, where people are now more conscious to bring their own bags when they go to the grocery.

I believe charging upwards of P5 is too much though. Again, I suggested in my previous post that P1 per bag is enough, since I am afraid this policy might disproportionately hurt the poorer folk. The point of the bill should not be revenue generation, but mere behavior deterrence.  And with deterrence, it's enough to go from no fee to some small fee, as opposed to going to no fee to a substantial amount. Behavioral economists would agree with me.

In the meantime, I'm still horrified by the cashier at my local minimart who insists on putting the small shampoo saches I've purchased in a plastic bag. Redundant much? I'll carry them home with my empty hand, thanks.