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The Role of Power Prices in Structural Transformation: Evidence from the Philippines

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  • Ravago, Majah-Leah
  • Brucal, Arlan
  • Punongbayan, Jan Carlo
  • Roumasset, James

Abstract

The Philippines provides a leading example of Rodrik’s Rule that developing countries experience deindustrialization at lower levels of per-capita income than did developed countries. Previous studies point to the role of protectionist policies, financial crises, and exchange rate overvaluation as explanations for the shrinking share of industry sector. We complement this literature by looking at how power prices influence the growth and composition of manufacturing in the Philippines, in comparison to OECD countries and Indonesia, Thailand, Malaysia, and Singapore. We find that higher power prices are associated with industry’s share turning downward at substantially lower levels of per capita income and that the decline is somewhat steeper. We find similar evidence for the movement of industry’s share in different regions of the Philippines. The composition of Philippine manufacturing, which stagnated in labor-intensive subsectors, provides supporting evidence that high power rates is likely to be a causal factor behind the structural transformation of the economy.

Suggested Citation

  • Ravago, Majah-Leah & Brucal, Arlan & Punongbayan, Jan Carlo & Roumasset, James, 2016. "The Role of Power Prices in Structural Transformation: Evidence from the Philippines," MPRA Paper 87718, University Library of Munich, Germany, revised Dec 2017.
    • Handle: RePEc:pra:mprapa:87718
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    References listed on IDEAS

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    Cited by:

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    2. Ravago, Majah-Leah V. & Fabella, Raul V. & Jandoc, Karl Robert L. & Frias, Renzi G. & Magadia, J. Kathleen P., 2021. "Gauging the market potential for natural gas among Philippine manufacturing firms," Energy, Elsevier, vol. 237(C).
    3. Gregor Singer, 2024. "Complementary Inputs and Industrial Development: Can Lower Electricity Prices Improve Energy Efficiency?," CESifo Working Paper Series 10944, CESifo.
    4. Majah-Leah Ravago & James Roumasset, 2016. "The Public Economics of Electricity Policy with Philippine Applications," Working Papers 201613, University of Hawaii at Manoa, Department of Economics.
    5. Majah-Leah V. Ravago, 2023. "The Nature and Causes of High Philippine Electricity Price and Potential Remedies," Department of Economics, Ateneo de Manila University, Working Paper Series 202301, Department of Economics, Ateneo de Manila University.
    6. Arsenio M. Balisacan, 2019. "Toward a fairer society: inequality and competition policy in developing Asia," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 56(1 and 2), pages 127-146, June and .

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    More about this item

    Keywords

    power prices; structural transformation; industrialization;
    All these keywords.

    JEL classification:

    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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