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

Author

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

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 examining the role of power prices in industry share across countries and across regions of the Philippines. We find that higher power prices tend to augment the Rodrik rule, causing industry share to turn downward at a lower GDP per capita, a lower industry share, and to decline more steeply than otherwise. In a two-country comparison, we find a tendency for power intensive manufacturing subsectors to expand more rapidly in Indonesia while the composition in the Philippines changes towards less power-intensive and more labor intensive subsectors. The results suggest that that structural transformation is not independent of power prices, particularly in the Philippines.

Suggested Citation

  • Ravago, Majah-Leah & Brucal, Arlan & Roumasset, James & Punongbayan, Jan Carlo, 2018. "The role of power prices in structural transformation: evidence from the Philippines," LSE Research Online Documents on Economics 139510, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:139510
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    File URL: https://researchonline.lse.ac.uk/id/eprint/139510/
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • 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
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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