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The role of power prices in structural transformation: evidence from the Philippines

Ravago, Majah-Leah V., Brucal, Arlan Zandro, Roumasset, James and Punongbayan, Jan Carlo (2019) The role of power prices in structural transformation: evidence from the Philippines. Journal of Asian Economics, 61. pp. 20-33. ISSN 1049-0078

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Identification Number: 10.1016/j.asieco.2019.02.001

Abstract

The Philippines provides an extreme example of Rodrik’s observation that late developing countries experience deindustrialization at lower levels of per capita income than more advanced economies. Previous studies point to the role of protectionist policies, financial crises, and currency overvaluation as explanations for the shrinking share of the industry sector. We complement this literature by examining the role of power prices in the trajectory of industry share. We make use of data at the country level for 33 countries over the period 1980–2014 and at the Philippine regional level for 16 regions over the period 1990–2014. We find that higher power prices tend to amplify deindustrialization, causing industry share to turn downward at a lower peak and a lower per capita income, and to decline more steeply than otherwise. In a two-country comparison, we find that power intensive manufacturing subsectors have expanded more rapidly in Indonesia, where power prices have been low, whereas Philippine manufacturing has shifted toward less power intensive and more labor intensive subsectors in the face of high power prices.

Item Type: Article
Additional Information: © 2019 Elsevier Inc
Divisions: Grantham Research Institute
Subjects: H Social Sciences > HD Industries. Land use. Labor
JEL classification: O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O10 - General
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O14 - Industrialization; Manufacturing and Service Industries; Choice of Technology
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q4 - Energy > Q40 - General
Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics > Q4 - Energy > Q41 - Demand and Supply
Date Deposited: 21 Mar 2019 16:33
Last Modified: 18 Oct 2019 23:08
URI: http://eprints.lse.ac.uk/id/eprint/100267

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