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The Impact of Market Reforms on Competition, Structure and Performance of the Philippine Economy

  • Rafaelita M. Aldaba

    (PIDS)

The paper studies the impact of trade liberalization on competition and productivity. Competition is the main channel through which trade liberalization affects economic performance. Competition fosters innovation and technology adoption which leads to increases in competitiveness and growth that will have large consequences for poverty and inequality. To realize these expected effects, it is important that firms change their behavior and adjust to the new market environment. The success of reforms depends to a great extent on the capacity of firms to exploit the new competitive conditions in the market and on their ability to take advantage of the opportunities offered to them. Firms, however, will not venture into the unknown and uncertain. They will only take advantage of the new market opportunities if the government program for implementing policy reforms is a credible one. Policy reversals, delays in timetable, and inconsistent decision-making may undermine the success of liberalization. Hence, the overall environment for market transactions is also an essential ingredient. Therefore, the strength of competition is a function not only of the behavior of firms but also of the external environment within which they compete. This includes the state of transport and communications, framework of laws and regulations, effectiveness of the financial system in matching investment resources with entrepreneurial opportunities, as well as information available to consumers. The experience of the Philippine manufacturing sector shows that which despite liberalization, competition and productivity growth have remained weak due to inadequate physical and institutional infrastructure.

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File URL: http://www.eaber.org/node/22306
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Paper provided by East Asian Bureau of Economic Research in its series Trade Working Papers with number 22306.

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Date of creation: Jan 2005
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Handle: RePEc:eab:tradew:22306
Contact details of provider: Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
Web page: http://www.eaber.org
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  1. Konings, Jozef & Van Cayseele, Patrick & Warzynski, Frederic, 2003. "The Effect of Privatization and Competitive Pressure on Firms' Price-Cost Margins: Micro Evidence from Emerging Economies," CEPR Discussion Papers 3703, C.E.P.R. Discussion Papers.
  2. Hoekman, Bernard & Kee, Hiau Looi & Olarreaga, Marcelo, 2001. "Mark-ups, Entry Regulation and Trade: Does Country Size Matter?," CEPR Discussion Papers 2853, C.E.P.R. Discussion Papers.
  3. Balisacan, Arsenio M. & Hill, Hal (ed.), 2003. "The Philippine Economy: Development, Policies, and Challenges," OUP Catalogue, Oxford University Press, number 9780195158984.
  4. Siotis, Georges, 2003. "Competitive pressure and economic integration: an illustration for Spain, 1983-1996," International Journal of Industrial Organization, Elsevier, vol. 21(10), pages 1435-1459, December.
  5. Domowitz, Ian & Hubbard, R Glenn & Petersen, Bruce C, 1988. "Market Structure and Cyclical Fluctuations in U.S. Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 55-66, February.
  6. Robert Feenstra, 2004. "Estimating The Effects Of Trade Policy," Working Papers 9510, University of California, Davis, Department of Economics.
  7. Pavcnik, Nina, 2002. "Trade Liberalization, Exit, and Productivity Improvement: Evidence from Chilean Plants," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 245-76, January.
  8. Aldaba, Rafaelita M., 2003. "Regulatory Policies and Reforms in the Power and Downstream Oil Industries," Discussion Papers DP 2003-16, Philippine Institute for Development Studies.
  9. Pravin Krishna & Devashish Mitra, . "Trade Liberalization, Market Discipline and Productivity Growth: New Evidence From India," Working Papers 96-8, Brown University, Department of Economics.
  10. Lamberte, Mario B. & Manlagnit, Ma. Chelo V., 2004. "Evaluating the Impacts of Competition Policy Reforms on the Efficiency of Philippine Commercial Banks," Discussion Papers DP 2004-46, Philippine Institute for Development Studies.
  11. James R. Tybout, 2001. "Plant- and Firm-Level Evidence on "New" Trade Theories," NBER Working Papers 8418, National Bureau of Economic Research, Inc.
  12. Llanto, Gilberto M., 2002. "Infrastructure Development: Experience and Policy Options for the Future," Discussion Papers DP 2002-26, Philippine Institute for Development Studies.
  13. Emmanuel S. de Dios, 1986. "Protection, Concentration, and the Direction of Foreign Investments," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 23(1&2), pages 57-82, March & J.
  14. Kim, Euysung, 2000. "Trade liberalization and productivity growth in Korean manufacturing industries: price protection, market power, and scale efficiency," Journal of Development Economics, Elsevier, vol. 62(1), pages 55-83, June.
  15. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  16. Aldaba, Rafaelita M., 2005. "Policy Reversals, Lobby Groups and Economic Distortions," Discussion Papers DP 2005-04, Philippine Institute for Development Studies.
  17. de Dios, Loreli C., . "A Review of the Remaining Import Restrictions," Research Paper Series, Philippine Institute for Development Studies, number RPS 1994-08.
  18. repec:rus:hseeco:121626 is not listed on IDEAS
  19. Fabella, Raul V., 2002. "The Regulatory Environment of the Energy Industry in the Philippines," Centre on Regulation and Competition (CRC) Working papers 30677, University of Manchester, Institute for Development Policy and Management (IDPM).
  20. Erkan Erdem & James Tybout, 2003. "Trade Policy and Industrial Sector Responses: Using Evolutionary Models to Interpret the Evidence," NBER Working Papers 9947, National Bureau of Economic Research, Inc.
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