Why has the Philippines remained a poor country?: some perspectives from growth economics

Abstract

Why has the living standard of the Philippines relative to that of the United States not risen unlike its Asian neighbors? Applying a simple neoclassical model and some empirical methods of analysis employed in growth economics on data on national income accounts and the workforce from the Penn World Table (version 6.1) and years of schooling from Barro and Lee [2000], this paper submits three interconnected answers : The country has been stuck in a low-growth trajectory. It is headed for a low steady-state level of output per worker, which explains its slow pace of long-term growth. Most significantly, its total-factor productivity, at 20.9 percent of that of the United States, is horrendously low, which explains its low convergence point. Improving its total-factor productivity is thus the key to solving the country’s low living standard.

JEL classification: O43, O47, O53