MA Economics
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Item Restricted Evaluating the influence of macroeconomic variables and uncertainty indices on optimal asset allocation(2022-01) Alipio, John Michael C.; Bautista, Maria Socorro G.This paper shows how macroeconomic information can be used to improve asset allocation by introducing the Modified Single Index Model (MSIM), a portfolio optimization process which incorporates macroeconomic variables through sectoral quantile regression to explain the common movement of stocks and use them as potential indices to generate portfolio allocations. Given the situation where the Philippine stock return data exhibit skewness and kurtosis deviating from normality, in which thick tails and sharp peaks exist, this optimization process uses Quantile Regression (QR) to capture the multifaceted dependence between the macroeconomic variables and stock returns. Empirical results suggest that there is an asymmetric relationship between the variables and the reaction of the market to macroeconomic fluctuations is highly heterogeneous across the conditional distribution of the stock returns. Further, this method does not impose the a priori restriction that all sectors behave similarly to macroeconomic fluctuations, as is implicitly assumed in much of the existing literature that examines composite market returns. The results suggest that there are potential disparities in the effects of macroeconomic variables on sectoral stock returns. With the evidence of varying performance of different sectors under the same economic conditions, this study points to the possibility of creating portfolio allocations with superior returns relative to the Markowitz' optimization model and the composite market index model.Item Restricted Republican donations and retaliation: the determinants of the U.S. trade wars(2021-01) Tan, Patricia Nicole N.; Daway-Ducanes, Sarah Lynne S.This paper examines the determinants of the U.S. trade wars, using two models: an industry-level model to examine why the U.S. protected certain industries, and a country-level model to examine why other countries imposed higher tariffs on the U.S. Using Tobit regression to estimate both models, we test for several possible explanations, including import-competing industries lobbying for protection, high import demand elasticity creating a market power motive, and the mercantilist disavowal of import penetration and trade deficits. We find that tariff increases were imposed on industries with a larger percentage of campaign donations going to Republicans. Specifically, every percentage-point increase in industry donations to Republicans increases the mean tariff increase imposed by the US by 0.015 percentage point, implying that a percentage increase in Republic donations results in a 122-percent increase in the mean tariff increase imposed by the US. In the other countries, we find evidence for retaliation against the U.S.: the country’s average tariff imposed on the US increases by 2.58 percentage points for every percentage-point increase in the average national tariff imposed by the U.S., implying that a percentage increase in the mean tariff imposed by the US on its trading partners is associated with a 17.2-percent increase in the mean tariff imposed against the US by its trading partners.Item Restricted Does banking competition affect financial stability in the Philippines?(2021-07) Lagac, Joyce Marie P.; Daway-Ducanes, Sarah Lynne S.The theoretical and empirical literature on the relationship between competition-financial stability remain inconclusive. The competition-fragility hypothesis argues that greater competition reduces bank profit margins that encourages excessive risk-taking among banks, endangering financial stability (margin effect). Taking a diametrically opposite view, the competition-stability hypothesis asserts that more competition drives down interest rates charged by banks on “safer” loans, reducing the probability of default and thereby promoting financial stability (risk-shifting effect). A third hypothesis forwards for an inverse U-shaped relationship between competition and financial stability: past a critical level of competition, the margin effect starts dominating the risk-shifting. This study investigates the impact of banking competition on the financial stability of banks in the Philippines from 2006-2015. Using two-step system Generalized Method of Moments, the empirical results verify an inverse U-shaped relationship between competition and financial stability, using the Boone indicator for loans as a measure of market competition. Moreover, for at least half of the banks in the sample, less competition results in greater financial stability, providing support to the competition-fragility hypothesis. The study also finds evidence that the Basel III policy has improved the relationship between banking competition and financial stability in the deposit market.Item Restricted Globalization and the narrowing of the gender gap in labor markets(2021-06) Estrada, Miguel Antonio G.; Daway-Ducanes, Sarah Lynne S.Despite a general reduction in global gender inequality over the years, women continue to face discrimination in labor markets. Women’s labor force participation in 2019 was only at 47.3%—substantially lower by 27 percentage points compared to men. Among factors that open economic opportunities to women, globalization has been among the most widely examined. The classic argument is that increased economic flows create work opportunities, especially for low-skilled individuals who are mostly females. However, this idea tends to reduce globalization to just one area and misses out other important facets. Using the multi-faceted KOF globalization index and the economic, social, and political sub-indices, as well as de facto measures of openness, we examine the effect of globalization on gender equality, as measured by the (a) female-to-male labor force participation ratio (F-M LFPR) and (b) F-M ratio of wage and salaried workers-to-working age population, wherein an increase in either ratio signals a narrowing of the gender gap. Employing two-step system GMM on a panel of 160 countries for the period 1997-2015, we find evidence that certain aspects of globalization result in a narrowing of the gender gap. In particular, we find that trade openness has a robustly positive effect on the F-M LFPR ratio; while the KOF social globalization has a positive impact on the F-M ratio of wage and salaried workers-to-working age population. We also find that institutions play a more significant role in reducing the gender gap for wage and salaried workers than for workers in general. The results suggest differences in the nature of informal and formal sector work, in that the former tends to be less likely found among wage and salaried work, where rules on equal treatment and non-discrimination tend to be more binding.Item Restricted Moderating effects of political competition and political dynasties on the IRA elasticities of development expenditures of Local Governments in the Philippines(2021-09) Quizon, Kevin Daniel M.; Magno, Cielo D.This study aims to determine how intergovernmental transfers affect the development expenditures of local government units in the Philippines using the concept of elasticity. Moreover, we examine how political factors, such as political competition, political dynasties, and term limit, affect the estimated internal revenue allotment (IRA) elasticities of development expenditures. A modified political agency model of electoral accountability is presented, providing us some hypotheses on the directions and magnitudes of the IRA elasticities, and how political factors moderate such. To test the hypotheses, we estimate and assess an econometric model, which is patterned after the theoretical framework, using panel data estimation methods and specification tests, employing a composite dataset sourced from various government agencies. Our results show that when a governor/mayor is not yet in his/her final term, he/she is likely to deliver more public services to his/her constituents, as evidenced by his/her positive IRA elasticities of development expenditures. We also find that these elasticities tend to be enhanced when that incumbent faces political competition or is a member of a political dynasty. On the other hand, we find that term limit has ambiguous effects on the said IRA elasticities, that is it may enhance or reduce such. Lastly, our results suggest that the political variables have the tendency to still affect the IRA elasticities of an incumbent even during his/her final term. From these results, we provide policy recommendations that may possibly strengthen local governance and promote equal local development.Item Restricted Education expansion and income distribution in the Philippines(2020-06) Alvarez, Julian Thomas B.; Daway-Ducanes, Sarah Lynne S.This paper examines how education expansion, in terms of increasing the average years of schooling, influences inequality and the distribution dynamics of income in the Philippines, by employing the decomposition method proposed by Firpo, Fortin and Limieux (2009) on household-level data from the 2004 and 2014 Annual Poverty Indicators Surveys. The findings suggest that the effect of a given expansion in the average years of schooling on income inequality may differ depending on how this is achieved: While basic education expansion increases the share of the lower income groups (thereby reducing income inequality), tertiary education expansion significantly raises inequality, as it disproportionately raises the shares of the richest decile. Education expansion also indirectly affects income inequality by affecting the probability of the household’s participation in agricultural activities, wholesale and retail trade and other sources of income. Finally, decomposing the effects of education expansion into its price and structure effects allows us to delve into the effects of education expansion on the distribution dynamics of overall income and wage earnings between 2004 and 2014. In terms of the overall income distribution, the structure effect accounts for a sizeable proportion of the observed increase in income inequality, while the price effect is insignificant. In terms of wage distribution, however, the price effect of education contributed to an increase in the wage earnings gap, as unskilled labor is placed at a disadvantage as a result of skill-biased technological change. These results shed some light on the potential distributional effects of recent education reforms institutionalized in the Philippines.Item Restricted A critical review of valuation studies for coral reefs and damage compensation in the Philippines(2020-05) Abrina, Tara Alessandra S.; Magno, Cielo D.In 2006, the economic valuation of Tubbataha Reef was undertaken for the purpose of calculating appropriate fines for ship grounding damages. That valuation study, Rosales (2006), prescribed that the fines should be based on the Total Economic Value (TEV; also called productivity) and restoration cost estimates. However, this approach has been shown to be incompatible with welfare-based economic foundations in legal and decision-making processes, at least in the way it has been applied in Philippine coral reef policy. The aim of this thesis is to review the ship grounding fines recommended by Rosales (2006) and its reference studies through the lens of microeconomics. Based on the review, I propose a methodology that uses (1) hard coral cover instead of area damaged; (2) willingness to pay (WTP) values for coral restoration instead of TEV; and (3) a tort law liability adjustment in order to integrate standard coral health metrics, social welfare, and remedial law in coral reef policies. This study demonstrates this methodology in the context of recalculating the fines from a ship grounding case on Tubbataha Reef in 2013. Results show that, although mean WTP values lead to a 235% increase in preferred recommended fines from Php 28M to Php 93M (2013 current prices) when the probability of the grounding is assumed at 10%, using the lower bounds of WTP values from a choice modelling reference study shows that the original fines from Rosales (2006) are not statistically different from the revised fines. Nevertheless, these revised fines are an improvement over the original fines as they include welfare economics and legal science considerations.Item Restricted Internet use among young adults in the Philippines: an inter-leisure demand analysis(2019-05) Panti, Rene MarlonWith the important implications of the prevalence of internet use and the continual rise in the time allocated for it, I investigate the factors that affect its demand and measure the probability of displacement that it causes other leisure activities. I use the Young Adult Fertility Survey 4 as the main source of data and categorize leisure into five general activities namely internet use, traditional media use, reading, exercise, and sleep. I find that the use of internet is significantly influenced by factors affecting skill and access namely age, educational attainment, level of urbanity, internet access at home, type of school the individual currently attends, civil status, family size, and number of friends. I also find that income variables and the availability of capital goods are significantly related to being online. In terms of displacement at low levels of internet use, I find that sleep is the most vulnerable and online engagement appears to complement use of traditional media. At higher levels of internet use, displacement occurs to almost all possible leisure combinations. Sleep still has the highest probability of being displaced but online engagement becomes a substitute to traditional media use.Item Restricted Surveying the extent and wage consequences of education-labor mismatches in the Philippine labor market(2019-12) Melchor, Monica Isabel Maria M.; Capuno, Joseph J.One of the ways in which educational outcomes are deemed successful lies in the translation of educational investments into expanded employment opportunities and higher wage outcomes. While education-skill mismatches are prevalent in both developed and developing economies, less work has been done in the developing economy context relative to the extensive analysis undertaken in developed countries, owing to data and other constraints. Amid these gaps, this paper seeks to estimate the extent of education-employment mismatches and the resulting wage consequences in the Philippine labor market. Utilizing data from the 2006 and 2012 rounds of the merged Philippine Family Income and Expenditures and Labor Force Surveys, the paper finds that as much as 38 to 39 percent of the employed individuals included in the analysis are overeducated and over a quarter of individuals are undereducated. The estimated proportion of educated and undereducated individuals varies considerably by method used. The returns to years of overeducation are estimated at 5 percent, after controlling for selection bias, as well as individual, sectoral, regional, and other factors, implying that an overeducated individual earns only 5 percent more for a surplus year of schooling relative to required years of schooling, which have returns ranging from 7 to 19 percent. Years of undereducation moreover yield returns of -4 to -10 percent. Given the wage impacts of overeducation, in particular, the results underline the importance of labor market policies targeted toward improving job-skills matching via the reduction of information asymmetries, for instance. The results moreover prompt reconsideration of public subsidies for higher education that are premised on the expectation of improved wage prospects or higher productivity of highly educated individuals, as these may not be realized in practice.Item Restricted Treatment effect of Pantawid Pamilya on monitored and non-monitored children of household beneficiaries(2019-12) Melad, Kris Ann M.; Capuno, Joseph J.The Pantawid Pamilyang Pilipino Program (Pantawid Pamilya) is the Philippine’s conditional cash transfer program that aims to break the poverty cycle by encouraging poor households to invest in human capital, particularly health and education of children. This is done by providing cash grants to beneficiaries who comply with the program’s education and health conditions. Per household, the program has set a maximum limit of three children who will be monitored for the education condition and will receive corresponding grants if compliant. This policy forces the program to select specific children for monitoring, while other children in the household are non-monitored. This study aims to reveal the effect of the program on education outcomes using an intrahousehold resource allocation model that tries to explain schooling decisions for monitored and non-monitored children in Pantawid households. This is done by estimating the impact of the program on certain education and related outcomes separately for monitored and non-monitored children age 6-11 and 12-15 years old using Regression Discontinuity Design (RDD). Results show that the program generally improves education outcomes of monitored children for both age groups. Non-monitored children of the younger age group are generally unaffected, while non-monitored Pantawid children of the older age group are negatively affected suggesting possible displacement of these children in favor of their siblings who are monitored in the program. There is also evidence that parents’ knowledge on program benefit scheme and monitoring status of their children are important in achievement of desired outcomes in education. In general, the study recommends that the program avoid tagging of specific children as beneficiaries of the program as this may result in unintended consequences on non-monitored children in the Pantawid Pamilya households.Item Restricted A study on determining the presence of workplace discrimination against the Filipino LGBT youth(2019-12) Jimenez, Christian Eligius A.; Epetia, Ma. Christina F.Despite the increasing influence of the LGBT community in the economy, anecdotal evidence shows that discrimination based on their gender orientation still exists. We employ a logit regressions model to test the presence of workplace discrimination among the LGBT youth in the Philippines. Two indicators of discrimination are used in the study: income as an objective measure and self-reported workplace discrimination as a subjective measure. In contrast to anecdotal evidence, we find that discrimination based on gender orientation is insignificant in determining difference in income and the feeling of being discriminated in the workplace. Further analysis of the individual data provides other factors such as gender at birth, employment status, region, urban classification of the area of the respondent, and disability are significantly related to the two indicators of discrimination in the workplace. The significance of this study is to provide empirical analysis on the economic standing of Filipino LGBTs relative to their heterosexual counterparts, offering inputs to the policy agenda of inclusiveness and non-discrimination in the country.Item Restricted Delineating market boundaries in the pharmaceutical industry(2019-06) Guzman, Ricardo Rafael S.; Abrenica, Ma. Joy V.Assessments of market power require a definition of the boundaries of the relevant market – the set of products and associated locations that are substitutable to firms and consumers. In antitrust, the prevailing paradigm by which relevant markets are defined is the Hypothetical Monopolist Test (HMT), a test that identifies the smallest set of products that a hypothetical firm would find profitable to monopolize. While the test is firmly grounded in economic theory, traditional methods to implement it examine consumer responses to price changes in a vacuum, ignoring consumer heterogeneity and institutional features that affect the nature of substitution between products. Failing to accurately define markets can result in misleading assessments of the degree of competition in an industry, leading to costly errors that diminish the efficacy of antitrust enforcement. This paper demonstrates the value of a structural HMT by comparing the size and composition of relevant markets under a SSNIP to a classification based solely on product characteristics. We implement this test in the market for pharmaceuticals where goods are highly differentiated, and several agents are involved in consumer demand. We find that the structural SSNIP test produces relevant markets that are distinct from those defined on the basis of therapeutic characteristics. Markets can be comprised of products from different therapeutic classes and smaller markets can exist within the narrowest possible therapeutic classes. Because relevant markets do not necessarily cleave along clear lines, enforcement agencies and antirust practitioners should be cautious when delineating markets on the basis of therapeutic properties.Item Restricted Skill transferability and mismatch among post-training graduates: an application of the task-based approach(2019-07) Generalao, Ian Nicole A.; Esguerra, Emmanuel F.This paper uses the task-based framework to examine the extent of skill transferability across occupations among Filipino post-training graduates using the graduate tracer study of Technical Education and Skills Development Authority (TESDA). From the task contents of occupations obtained from ISCO-08, a task portfolio for every occupation is constructed. Distance and direction measures are developed to classify an occupational move as up-skilling, down-skilling or a lateral move. The combination of these two measures estimates the level of skill mismatch associated with occupational mobility and the extent of human capital accumulation or loss in the process. Using maximum likelihood Heckman sample selection regressions, the study finds a significant positive relationship between occupational distances and wage changes supporting the model’s prediction of human capital accumulation associated with wage gains. To measure the transferability of skills in the labor market, this study applies the occupational distance measure to investigate the effectiveness of training programs in matching the expected and actual post-training occupations of graduates. We find that only a small portion among post-training graduates experience job-training match suggesting the poor performance of training programs in the aspect of job-training matching. Correlates of this job-training mismatch are computed using logit regressions. Finally, policy recommendations and areas of future study are presented.Item Restricted Family network as informal contract enforcement mechanism(2019-07) de Guzman, ReinierThis paper investigates an informal contract enforcement mechanism that could induce positive-sum transactions between a firm and farmers. There is a hold-up problem of firms not engaging with smallholders given the risk of side-selling. I examine the experience of Lamac Multipurpose Cooperative in buying vegetable produce from smallholders and selling these to institutional markets. I model this as a repeated game between the cooperative and the individual farmer. The model predicts that a stronger family network reduce the optimal price that the cooperative would need to offer to a farmer in order to make it rational for her to honor the contract. Data on committed delivery, actual sales, and farmers’ network centrality measure are used to test this.Item Restricted Does ICT contribute to labor productivity? an industry-level analysis of the relationship between ICT investments and labor productivity in the Philippines(2019-12) Cruz, Karisha Anne E.This paper investigates the relationship between ICT hardware and software investments, and labor productivity using a panel data of Philippine industry groups in 2010 to 2015. The study employs random effects models to analyze the panel data. To account for possible sample selection bias, the study uses a Heckman two-step estimator of the full model. Additionally, this paper measures the differentiating effect of ICT when considering industry-specific characteristics (i.e., average firm age, employment size, education, foreign capital participation, corporations, and export-oriented). The findings suggest that industries are more likely to increase labor productivity by investing in ICT software and database systems. The results further provide evidence of the differentiating effect of ICT investments by various industry-specific characteristics. Employment size and share of foreign ownership strengthen the effect of ICT hardware on productivity. Meanwhile, age and share of exporting firms negatively influence the effect of ICT software and hardware, respectively. Both ICT hardware and software investments have no differentiating effect by share of high school workers and share of corporations.Item Restricted Enforcement and the informal sector: evidence from the Philippines(2019-07) Cariño-Francisco, Emma B.Studies show that the existence of the informal sector may be symptomatic of underlying institutional and structural frailties, which may ultimately hinder long-run growth. Using probit regression analysis on pooled (2,661 firms) and panel (750 firms) datasets from the 2009 and 2015 World Bank Enterprise Surveys for the Philippines, this study finds that institutions determine firm behavior. Firms that perceive manifestations of enforcement mechanism failures as obstacles to firm operations, such as corruption, bribery and inaccessible land are more likely to engage in informal activities. Apart from highlighting the importance of strong institutions, these results also lay the basis for further research on governance efficiency and its effects on firm behavior.Item Restricted The Nation’s Gaps Offsetting Budgeting (NGOB)(2019-07) Dayao, Fernando S. Jr.; Esguerra, Emmanuel F.This paper introduces a new normative public budgeting theory named “Nation’s Gaps Offsetting Budgeting (NGOB)”, a theory designed to solve Vladimir Orlando Key’s basic budgeting problem - “Faced with limited resources, on what basis shall it be decided to allocate X dollars to Activity A, instead of Activity B?” NGOB, as its name implies, prescribes that the primary basis of budgetary decisions and prioritizations should be the offsetting of the more pressing nation’s gaps of the particular country/place. As preliminary background, this paper narrates the history and development of public budgeting from antiquities up to the current years. Then, this paper evaluates the existing normative public budgeting in order to answer why it is necessary to come up with a new alternative public budgeting theory. The basic concepts, rationale, principles, and the processes adopted are discussed therein to provide for a detailed introduction of NGOB, in theory and proposed practice. Application of NGOB in actual practice necessitates designing a new approach in presenting the budget, which is introduced in this paper as “Macro-Micro Budget Approach.” NGOB likewise requires formulation of a nation’s performance and results monitoring framework introduced herein as “Nation’s Overall Performance Index” (NOPI). The research problem in this paper is whether or not NGOB can provide sufficient and definitive answer to aforesaid Key’s budgeting problem. To test and illustrate the applicability of NGOB into actual budget preparation and in solving the Key budgeting problem, an Alternative Fiscal Year (FY) 2018 NGOB-based Budget of the Philippine National Government was prepared, consistent with the principles and parameters of NGOB. The result of NGOB application showed that it has inherent theoretical and application limitations, and there are instances that it could not be applicable in giving a definitive answer to Key’s budgeting question. It is therefore concluded that while NGOB can be regarded as a new alternative rational theory in public budgeting, it is not an all-encompassing theory that can solve the Key budgeting problem sufficiently.Item Restricted The role of financial inclusion in income distribution and poverty in the Philippines(2018-06) Reyes, Rossvern S.; Bautista, Maria Socorro G.Financial inclusion is identified as the process of easing the access, improving the availability and maximizing the usage of the formal financial system and its products and services for all members of an economy. Advancing financial inclusion is becoming a primary agenda in many countries because it is recognized as a potent tool for development and economic growth. To verify the positive role of financial inclusion, this study assesses empirically the role of financial inclusion in alleviating income inequality and poverty in the Philippines. The results of panel data regression using three sets of two-dimensional regional financial inclusion indices and other indicators find no robust evidence that greater access and usage of finance improves income distribution and reduces poverty in the Philippines. However, existing data constraints need to be overcome to allow a more extensive investigation of the issue.Item Restricted Mendoza, Teresa B.(2018-12) Mendoza, Teresa B.; Magno, Cielo D.This study primarily aims to examine the relationship of political and institutional factors to infant mortality in Asia and the Pacific. This is of high relevance as many countries in the region have seen strong economic growth over the past decades along with higher public health funding, yet infant and child mortality rates remain high, falling short of the Millennium Development Goals (MDG). According to Transparency International (2010) and the United Nations Development Program or UNDP (2016), breakdowns in governance and corruption have been major obstacles to attaining MDGs. The UNDP also noted that attaining progress in women’s empowerment in policy making has proven to be difficult, impeding development goals. Building on these lessons, the ensuing post-2015 Sustainable Development Goals (SDGs) uphold accountable governance and gender equality as among its fundamental elements. Using data covering 28 countries in the Asia Pacific region, this study found that strong oversight at the executive branch of government, and less or no corruption and embezzlement at the executive and legislative branches associate with lower infant mortality. This study also found an equally negative relationship between infant mortality to women political representation, and infant mortality to public goods type of spending as opposed to particularistic or pork spending. Overall, the results suggest that greater attention should be given to governance and institutional factors which are important contributors to improving infant health and survival.Item Restricted “Peace of mind” effects of social health insurance in women: evidence from the Philippines(2018-05) Manguni, Grachel; Capuno, Joseph J.Sense of financial insecurity in accessing needed health care is prevalent in women in the developing world. Health insurance is advertized by insurance providers and anticipated by insurance seekers to bring the insured “peace of mind”. However, few studies have evaluated health insurance for this particular effect. This thesis, therefore, estimates the impact of social health insurance on sense of financial insecurity in accessing needed health care in women in the Philippines. Using observational data, the 2013 National Demographic and Health Survey, and a matching technique, Propensity Score Matching, we find that having PhilHealth insurance reduces the probability that insured women will perceive getting money for needed medical advice or treatment a “big problem” by 7.9- 8.4 percentage points. This effect is statistically significant at p < 0.01 and robust to possible hidden bias that can change the odds of PhilHealth insurance status by 28-30%. We also find that this effect varies by poverty status and level of wealth. Specifically, we find effects ranging from 5.3 to 11.3 percentage points in subsamples of insured women who are non-poor. However, we find no effect in subsamples of insured women who are poor. At the country level, these results suggest that PhilHealth’s recently implemented pro-poor policies could be steps in the right direction. Within the literature, this study contributes to the currently limited evidence on how health insurance fares in providing women with a more holistic financial risk protection that not only mitigates their financial loss but also alleviates their financial worries.