Association of German Educational Organizations

Rapid growth in the People's Republic of China (PRC), which began as it embarked on economic reforms in the late 1970s, has been accompanied by rising income inequality. During 1985–2006, the country's real per capita gross domestic product grew at an annual average rate of 8.5%. Such strong growth led to an unprecedented reduction in the incidence of poverty, from 32.5% in 1990 to 7.1% in 2005, measured by the $1-a-day international poverty line (Ali and Zhuang 2007). However, the Gini coefficient of per capita income also increased, from about 0.30 in the early 1980s to about 0.45 in 2001 at the national level (Ravallion and Chen 2007).

Introduction Asian development between the 1960s and the 1980s featured rapid growth in the newly industrializing economies—Hong Kong, China; Republic of Korea (Korea); Singapore; and Taipei, China (later followed by several Southeast Asian economies) — and more sluggish growth in South Asia. Interestingly, though there were exceptions, low income inequality appeared to characterize both groups in comparison with developing countries in other regions, especially Latin America. However, since at least the 1990s, high rates of economic growth have become more common in the region, and it is widely believed that inequality has grown in many countries. How correct is this perception, and how broadly does it apply to a region as diverse as developing Asia? This chapter brings together recent evidence on inequality in incomes and, especially, consumption expenditures. Clearly, incomes or expenditures are by no means all that goes into determining economic well-being, that is, an individual's access to goods and services. Educational and health status, political power, or access to justice, among others, are all important factors that contribute to economic well-being. Accordingly, the manner in which these other variables are distributed over a population is relevant to a study of inequality. However, this chapter's focus is on the distribution of economic well-being as captured through data on incomes and expenditures. (See Chapter 3 for a detailed examination of issues related to education and health.)

The Philippines has long considered sustained growth of income and employment, along with poverty reduction and improved distribution of income and wealth, as major development goals. In pursuit of these goals, the country embarked on an industrialization drive after gaining political independence more than a half century ago. The drive continues today. The primary strategy involves transforming an economy that still has a large agriculture sector into an industrialized one. Through this strategy, policy makers aim to move individuals, households, and enterprises from low- to high-productivity sectors and activities to trigger and propagate the desired economic and social transformation.

The Philippines' economic growth during the past five decades has not been impressive compared with that of many of its neighbors; in per capita terms, the growth was even less favorable. As a result, the pace of poverty reduction has been slow, and income inequality remains high. In 2006, about one in four Philippine families and 32.9% of the population were deemed poor, and the Gini coefficient of per capita income was slightly over 45%, among the highest in Southeast Asia.

The Philippine experience after World War II, relative to that of other countries in East and Southeast Asia, has caught the attention of eminent economists studying growth and development. Lucas (1993), for example, asked why the Philippines was not part of the “economic miracle”–the remarkable East Asian transformation featuring Hong Kong, China; the Republic of Korea; Singapore; and Taipei, China. This section describes and tries to account for performance in growth and poverty reduction in the past several decades and the evolution of the Philippine Government's development policy. Synopsis of Philippine Growth Following the Philippines' political independence in 1946, in the 1950s, the country embarked on an industrialization drive. During 1950–2006, the Philippine gross domestic product (GDP), expressed in 1985 prices, expanded 11.2 times—an average growth of 4.4% each year. But the growth rate was never smooth. For instance, the economy contracted in 1984–1985, 1990, and 1998. Accounting for growth in population—which rose from about 19 million in 1950 to 87 million in 2006, for an average annual growth of about 2.75%—in 1960 the Philippines had a per capita GDP of about $612 expressed in 2000 United States (US) dollars (Table 2.1). By this measure, it was ahead of Indonesia, with a per capita income of $196, and Thailand, with $329. The Philippines trailed Hong Kong, China; the Republic of Korea; Malaysia; Singapore; and Taipei, China. By 1984, Thailand's per capita GDP of $933 had overtaken the Philippines' $908.

This study will attempt to assess the total (direct and indirect) impact of Production & labor on regional economies in the Philippines using the input-output (I-O) approach. For an encompassing and in-depth analysis of the structures of regional economies, a multi-region inter-regional I-O model covering five (5) geographic divisions or regions of the whole Philippine archipelago shall be used.To make this study more meaningful in policy formulation, the study will be extended to distinguish employment in the large-scale from the small-scale industries.