THE PROTECTIONSTRUCI't._E,, RES_E
F_,._C_ AND THE
CAPITAL-LABORRATIO IN PHILIPPINEivP,_UFACTURING: A SI-IORT Fb4PIRICAL NOTE.
by
PAFER S_!F_S No. 85-01
THE PR_IGN
STRL_%ITRE, RES(_
CAPIT_LABOR
RATIO .INP}CfLIPPINEMANUPAC_K[NG_2%_'
The the
trade
Philippines
FIMPIR_ICAL
and
industrial
can
be
protecting
heavily
generally
penalyzing
been of
a conscious
Investment
However,
Reform
exports_
effects
Norma
uniform
degree
of
import
advent
of
the
of
Tan t 1979
(TRP),
which
level,
aims
was
the
the
).
Board
exports. been
In 1981,
launched
eno_&gh
the
down
crisic_ starting
at
Tariff tariffs
together
•However,
liberaliza_.ion
ha_;
protection
'to bring
liberalization.
economic
1983,
to promote
adverse
(See
there
through
not
looking
and
708,
have
by
inward
products
particularly
incentives,
adopted
as
in the
incentives
Program
of
consumer
export
to a more
half
final
(BOi)
the
structure
policies
characterized
effort,
these
to counter
_Z_WS AhD
in
with
some
the
the second
program_, became
inoperative. The
system
is perhaps
the
policies.
It
are
possibly
is,
production
thus,
very
effects
of
Trade
tariffs and
p_'otection
most• pervasive
the
employment. (e.g.
of
theory
& QRS)
among
by
all
the
affects
what
structure
that scarce the
country
to know
tariff
the
any
government
important
suggests
benefits
adversely
adopted
trade
restriction
factor
abundant
on
of factor.
2
In the the
case
of
abundant
expect
factor
that
the
Philippines some
mŠ_!,: LDCs_
the
is
including
laDor.
tariff
Thus,
First
to
all,
us u3e
of
evidence let
protection
rate
the
receives
from
this
co_Id
secto_
Specifically,
(EPB)
This
by
short
suppo:r._tthis the
to. indicate the be
we
the
paper
offers
conclusion.
concept
of
effective
overa].i
incentive
the
tariff
Philippines,
a pr_ozi,
st_:_uctv_.=:e adopted
ha_._s emplo_i,_nent_
empirical
the
and
r'epresented
tax .syste_. by
1 ]
a, !+T
....... I.+....._
,.
L
._|
_: .Pro_-ected domesnic value-added :- _,'reetrade _.'a.L '°_ ue-added .......... '
_here
ai j output
j
and
inp_t
It is usually flow
from
This
paper
of T.
i
log_cally
sectors
:input
i
per .
_,n do_-_.esticprices,
inclusive Ti
_t of "_a.._. _e
is the
with
tariffs
and
are
implicit
and
the
output
ass_ed .low EPR
olffers empirical
j
that
peso _
of
i.e.,
taxes,
and tariff
on
respectively.
resources
to those
evidence
-i
to
with
would high
support
EPRs.
this.
3
Using
the
input-o::_tput
Norma
Tan
computed
the
Using
her
implicit
tariffs
I-0
Table,
the
computed.
We
specifically and
1974
and
2.
EPR
by
not
except (I)
seem for
is
for
change
as
the
weights,
two
p_rcent
in
weights
the
31.4
percent
There
is
inherently
and be with
imports associated low
domestic in
as
the
imports. supply
estimates.
seem
the
weights
to
went
•36,2
1974. exports
would
high
upward
as
down
in
reason, an
supply
manufacturing
using
tariffs
opposite creates
in
and
relevant
imports
percent
J.mports
used.
more
1969
even
bias
tariff
were
for
and
1974
systems
domestic
tariff
26.2
to
exp ....... ts and
the
Using
1
tariffs
1969
systems
tariff
Tables
in_plicit
exports
higher For
as
average
low
1969
in
average
_ising
since
for
weighting
in
a downward
sector
from
peccent
to
1.969
_'eadily
I+T
32_7
1969
weights with
{2)
here
implicit
!974.
xmp_ icxt
two
implicit
fro_
in
presented
tariffs.,)
while
from
are
weighting
ave_rage
average
was
and
....the
e_her
for the
EPR
and
Table,
manufacturing
Using
(W 3)
implicit
1974,
sector
sectors
presented
slightl_
and
signifJ.cantly
weights
the
only
the
cases.
(two
1969
th_
Results
supply
averaging
rose
compare
a few
calculated
However,
as
to
(W4)
at
Transaction
.i-_0 sector:
for
individual
domestic
im_rts
by
].969 by
look
sector.
Examining did
for
then and
EPR
(I_0)
normally
tariffs using bias
Table I_
We_i._hted Av_ag_
ImpLicit _!__,
1969 & 1974
I +T
-
Sugar Food except Sugar Be_aragss Knitting Weaving Textiles except rubber Wearing apparels Ply_x_ & Veneer Furnitures & Fixtures Wood Plr_ucts Paper & Paper Prcd_ict_ & Publ/_hing Lea_ _ Ruhbsr shoes " _,e_ _ Other Chemical products Industrial Chemicals Petroleum R_fi_sries & of Petrcdeum & Coal Glass _ & China Other ncmmetals & Steel non-_ Fabricated metals M_zhlnery except electrical machinery (_aiicatiun _quipm_nt F.,lectrL",_ ) Appliances Transport Equipment Plastic Products Pzofesaicr_l & Scientific All _in_
as
)
(w4)
ortsas
1969
1974
1969
1974
.960 i.194 3.ll0 2.]90 1.550 i.543
.940 i.219 2.692 1.290 1.590 i.530 i.250 !.062 .980 !.010 .996 i.819 1.290 1.565 2.170 1.860 I째501 1.220
.960 i.288 3.ll0 2.190 1.550 1.541
_940 I.217 2.996 1.290 1.590 i.538 1.250 I.084 .980 i.010 1.002 i.685 1.290 1.303 2.170 1.527 i.430 I.137
i.529 i.000 I.000 i.163 i.653 . 2_272 2.170 1.676 I.460 1.164 .1.308 1.510 1.740 ,3,_231. I.32(_ 1.260 1.541 1.235 I.270 1.270 1.644 1.530 i.760 i.489 1.327
!.61] L580 1.58_ Li02 1.3_0 1____, I_,5,'t.0 1.219 1.32? I_390 1._9_3 1.845 I_960 1.0_4 ' I_362 ........
i._24 i.000 i.000 i.046 I.582 2.381 2.170 1.556 I.464 1.147 I.299 1.510 1.740 1.577 I.320 1.260 1.520 1.236 1.270 1.270 1.594 1.502 ].. 760 I.376
1.613 -1.580 1.580 1.112 i.360 i.150 1.502 1.216 1;327 i.390 1.849 1.740 I.960 i.034
1,314
" " 1.262
5
Thus,
it seoms._very
average
impZicit
reasonable
tariff
to conclude
that
for manufacturing
did
the
not
change..significantly.
Looking tariff
at
structure
1974
EPR
using
these
Eesources
do
industries
with
or ,value of in 1974
use
production),
next
of capit_l
resources Hooley's. labor
from
Again,
value-added
(WI}째
i8 that
low
high
EPRs
EPR
in
to 1974
(whether. value-added!
industries
question
and
labor
are
low
EPRs of
the
weighting,
to
with
high
EPRs
is
how
the
relative
affected
in
the
shift
hlqh
c_pltal
Resul_ts
and
of
importa_t
by industry,
two
weights
(1) free
production
with the
1969
to ,1969_
estimate
is estimated.
since
the
from
indicate
industries
EPRs
same,
i.e.,
(2} domestic
to higher
relative
The
fr_n
high
--was clearly, due
system,
unambiguously
flow
the
the
substantially
weighting
(W2) or
results
although
basically
increased
either
trade, value-added What
2_ however,
remained
_ei_average to
Table
EPRs.
(netfixed.
average
presented
systems
are
use_
production.
Richard
assets)
capital-labor
are
domestic
Using
in
and
ratio
Table
---
of
3_..
(K/L)
free. trade
6
'Cable 2..
Weighted Aver_ Effective .1969 & 1974
m_/_c_
Protection
(EPR) in _d_a_c_i_,
_ value-aaaea Av_,_, asFree Trade weigh_ 1969
S-_r
.950
Food _ Beverages
Rate
sugar
1974
.eeo
Using A_rag6_._ _ as Weights 1969
.9_0
1974
._0
1.115 2,840
2.063 2,844
1.273 2.840
3.183 2.844
Knitting
4.890 i.600
.960 1.780
4.890 1.600
.960 1.780
Textiles
1°443
i.612
I.676 _
I.549
i_=ewe_exo_t n_ber
i.180
1.180
Weaving appare/s ply_Dods & Veneer Furniture.& Fixtures Wood _
.851 .920 ,940 i.007
,679 I.050 I.000 1,086
1.192 .920 .940 1.064
,722 i_050 I.000 1.082
_
1 752
2.327 i.19o 1.956 s.s40
1.809
2.4_ 1.190 1.770 s.s4o
i.069
i.049 .905
_ _>o_er _od=_ __u_ _ _o_
trial chsmicals Petroleum Be/ineries _rolegm and Coal _ & _%irm Other nommmtals & Steel Nsn-F_us
_
3.282
2.6s0 I,089 .888
2.650
1.550 .... 1.650 1.004 I.310 i.160
1.209 1.450 1.310 .7:,i 1.270 I.000
i.550 i.650 1.112 1.310 I,160
i.019 ,® i.209 i.450 1.310 .812 1.27_ i.000
1.17o
z._:,_
_._73
1.lOS
_lactz/cml mad%inezy ___icati_n ]_/_,tnment Electrical appliances _nsport ]_dpmmnt plastic Prod_',t_
I.210 io120 I.755 1.323 1.950
I. 229 I.310 2.218 2.072 2.940
1.210 i.120 I.821... 1.335 !.950
1.229 I.310 2.211 2.077 2.940
AlZ z,'an, d.ac'curi_
1.127 ......... 1;_S2_ ......
1.291
z._oe
_ sci_c
er_ee_a=_
sources
m_
3.252
of
basic
data:
1. _o4
Same
_. 2n,
as Table-l.
1.435
1.340
7_
Table
3j Average C_pital/Labor Ratio in Manufacturing, 1969 & 1974
:[_000/worker) 1969 1974
Indus try/Sector Sugar Food except sugar Beverages Knitting Weaving Textiles Footwear except rubber Wearing apparels Plywood & Veneer Furniture & Fixtures WoodProducts Paper & Paper Products Printing & Publishing _eather Products Rubber Shoes Rubber Products Other Chemical Products Industrial Chemlcals Petroleum refineries & products petroleum & coal Glass product8 Pottery & China Other nonmetals Iron & Steel non-ferrous Fabricated metals Machinery except Elect_ical Electrical Machinery C_muunication equipmen t Electrical Appliances Transport Equipment Plastic Products Professional & Scientific All
Manufacturing Mean using average value added as weighm Meanusing product
Source:
34.872 28.208 23.169
44..732 28.118 25.590
22.877
Ii.185
13.660
5째327
3.785 10.467 37.184
4.540 13.360 58.424
9.143
12.056
26.630 24.701 81.15
20.524 25.689 64.697
586.091 23. 802
874.769 31. 858
93.509 11.706 14.332 22.056 16.055
69.493 19.966 20.348 12.842 12.789
of
(W2)
_-
24.664 12.650
28. 200 10.957
46.48373
76.23664
domestic ..................... as weights (WL)..... 66.04689
128.45070
1)
Richard Hooley_ "Productivity Change in Philippine Manufacturing: Retrospect and Future Prospects." PIDS paper. 1984.
2)
1969
and
1974
I-0
Tables,
NCSO.
....
8
Looking
at
individual
that
the
sectors
such
as
food
excluding
sugar
wearing
apparel,
and
machinery
except
ratio
rose
products,
and
in sugar
system,
The by other tariff
the
rise
in the
a lower tariff
an
use,
in the
low
structure cheapened. current the
of
that
duty
foreign
so that
Moreover,
in the
account
deficitswith
world's even
minimal
in a real
paper
coal.
For
from
1969
to 1974.
could
have
keen
clearly
flows
from
protection
caused
that
or
goods
(in certain free),
below
equivalently
last
be
the
degree by the
of tariff
is artificially
decade
domestic
of
persistent
inflation
exchange
appreciation
can
the
cases
defendea
capital
the
low
Furthermore,
capital
all
industries
intensity,
foreign
while
either
exchange
(Tan 1979)
textiles,
using
process.
duties
is allowed
undervaluation
high
and
and
indicate
capital
with
importation
resulted
to
is such
very
ratio
in
electrical
ratio,
resource
structure
imported
than
induced
increased
labor
_/L
results
industries
entailing
refining,
paper
doubled
K/L
but
structure
protection
average
interesting
significantly
of petroleum
almost
factors
declined
refining,
products
manufacturing, weighting
ratio
it is
to note
the
K/L
sectors,
of
higher
adjustment the
peso.
9
In
sum,
the
exchange
induced
a capital
explain
in a large
which with
accompanied low
bias
the to
sector An
the
this
trade
policies
system
which
rise
resource
findings
manufacturing
and
in the
part
protection
These
employment
rate
failed
last
flows
industries shed
some
in the
with light
to grow
decade.
*****
from
have could
K/L
ratio
industries
high
protection.
as to why
the
as a generator
of
RBferences t Bautlsta, Romeo H., John H. Power and Associates. Industrial Promotion Policies in the PhiliDplnes. Manila_ Phil_Ipplne Institute for Development Studies, 1979_1%|4. Hooley, Richard, "Productivity Growth in Philippine Manufacturlng: Retrospect & Future Prospects". Paper presented in a sm-lnar sponsored by the PIDS on July 25, 1984 at the Opeu:ati_s Roan, NEDA sa Makatl Buildlng. Pante, Filologo, Jr. "Exchange Rate Flexibility and intervention Pollcy in the Philippines, 19731981." PIDS Staff PaPer Series No. 83-01, Feb. 1983. Power, John H,, "Response to Balance of Payments Crises in the 1970'sz Korea and the Philippines." PIDS Staff Paper Series No. 83w05. Tidalg0, Rosa Liras P. and Esmanuel F. EsguerEa, "Philippine Employment in the 1970s." PIDS Working Paper 82-02, July 1982.