ESTIMATING_
SH_OW _
I_T_
DISGOLNTFOP,,THE I_.!ILIPPINES
__M. ,Tatm I-I.
ea,.r_.
mz_ _. e_-o3
*This psptr, is an output of the UN_ project of the Nd_ipptne 7_8_Ltute fer Developuent Studies (?ZD$) on Shtdog ?rt_es and Project lh_Luat/on. In the course of the p_o;Ject, v_ coL1Lsborsted with the usmber8 of the Pro:Jeers Ecomm_cs S_tff of the gACiom_ Ecmu_dc and Develotmmt Author:LL7 (]_). We Sratef-l_y _knavledp _ suppoz'l:. Leah Gu_ie_es o.f t_e PIDS provided very &ble r_ 8ss_Lsl_mae.
1,
Ta_trodu_tton
:A re:lot t;-k in the ecoMutc evaluat,on of proJecte .
•
.
£e the v_tJ_m
..
of foods
and reeou_eea
used mad p_roduaod,
zf re:Irate fun_tlon efeictently andereely, obmbla _Im_
pr/_,
ehoeXdsuff_i_ntXy
/adleate the, vaXut/ma.
so_ver, =a:ket_pertect*ons do u..t,,_--',,F, ct,X.xy -tim X,_ de.loped countr*ee. semm_ _rket C_lpat£ttve
,aural.am i_r..Xy fr_
fa_lJ.u_,8such as the .rmsr_e elx_nts,
• pervuirely
_
eztezne_ties,
etc..
ee nonbut more
from Soverummtpo_IL_S:uthemelvu,
e.s.. Xn m_h e.mnm,
mad. moot _otebXy. the pro_e/oa
structure.
nax_t prices are d_tort_l,
not refXect:£ve of Urue
...
i.e.,
.
'x_hative sca:cit_8 of soodsend ruo_. method of calcul_tLon
is. required
coats and: be_f£t, '_da_
...to m_.J_..Tb.ts
: In t2m:l_L2_pines, more ti_ut In an7
there
other I_C,
.
The s_d)v
h_a
£8 the _ed
been attempts.
to e_C_te
fo_ use tn project ev_uation. • t_t-£ve ie :l.n the kut£ote..Pear -
vhidla you,d z_fZoat
of goods and resouz_:es.
pr:_i_.,
.
An _ter_tLv,
The nest
tbeu
sbedev p_e_
recent
.
provide8
estimates
_
and cube•
and _,eee.ia_
of the ehad_v, price
.
_hme
of f_
exchanse or the shader excbemserate • (SLY) £or "1974. shadow price the so_£al
of l_bor
or ehhdov vase rate
d£_ount
rate
and- theehedog
(SWQ for 1977 p_
of upitel
-
based,
on 1974.data.
to review prices
It
This
paper
shadow price
£s divided
2.
.
•rate
attributed in
exchange
_(OF_)"m_ght
The wedge
the
For where
rate
between
for
level of foreign
of
the
of
shadow of
the
and use.
also
referred
_s an often than
a signal £n the
the official
balance.
The latter, ettucture_
however,
a .disequilibriua
the protection
_s deemed ..
can be
(1)
way be required borrowing
exchange
a. correepondin8
trade
two factors;
to
misunderstood
for
(BOP) and (2)
•
in the protection
the
the SER and the 0ER, however,
a devaluation,
maker.
exchanle,
equilibrium
a combination
the former,
by a policy
and (3)
a discussion
an SER higher
balance-of-payments
the
(1)
shadow price
l_,uitations
(SER),
be .mistaken
to achieve
to
um_ly"
Exchange
of foreign
For example,
d_aluetiun
the
contains
- sources,
of Foreign
The shadew_price
concept..
(2)
shadow prices.
..
The Shadow Price
as the shadow
parts,
discount;
F_ach section
and the data •
K shadow
of these
three
paper
...-....
labor.
methodology
of
of this
estimatJ.n
estimates into
rate
•
purpose
in
exchange;
•sav/n s and the-social of
used
more recent
of fore£sn
.
-
is. the main
the methodologies
and obtain
price
2
up to the
structure. point
to be acceptable
.
.
calla
and not necessar'tly
for
a refom a devaluation.
An SElf higher LDC@elaply (used
than
reflects
relative
Zt does less,
not,
3
the
On
-
(as vould
the pre_Lua
or produced)
torted
-
we ere
when evaluatlng
prices
betweea
in itself,
suuest
a devaluation
to the
traded a need de_ee
This
protection
systea
only
relationships
maong tradable
of tradables,
in seneral,
the
prices
Anoag t_adable corrected
price the
role
tent
with
border
evaluation
for
such
each
superiority.
SSR 4.
factor
Tn this
factor
between
of the
conversion
further
for
project
of
connection,
reKarding
the
as the
SEIt, as against
£n theozT,
1/Or. alternatively, the SgR, in its reciprocal, border prices of tradables non-tradablee.
o£ the
if
their
amy be
relative
however,
It
border
for
the This
serves
to make their
literature
is
but aleo
to non-tredablu.
evaluation.
have
There
not
and non-tradablee.
tradables.
$ER
from the
distortion
correction,
there
non-tradable.
by the
ccemodiCAee
by usin8
non-tradables
prices
uuch
and affects
price
tradebles
ccmwditles.
arises
reXative
relative
evaluation
We would need distortion
prices
(and BOP disequilibrium)
in project
prices.
in relative
commodities,
the dis-
a, dWa_,uation,
indicate4
in
exehanse
to correct
for
case
on fora_
and non-traded
estinate,
price
be the
plac:l_
projects
exact
distortion
usually
is
as the
prices
cons_a-
-1/ been use
arguments
of a standard
a spec_Lfic general
latter
in
the
conversion
conversion
aBreement over
the project
factor
on the
former.
evaluation £s done in dolest£c currency, is used as the conversion faetor to brine consistent _r_Ch domestic prices of
In practice,
hmmvec,
ic is ofce= not couv_euc
co compute _ec_.f£c:couvmrs_ou
factc_a,
t6 decompos_non-cradables co,_letely prkmaz7 facco_
couvmrstau
tale
point
hamever,
in pro_e_t
projects.
£o_ domestic
oCh_
Thus, .m_
p_.aaz,y
Zesou_ce
7or tnstace,
Secoud,
It is used lu deri_nS
(except
_
ca_ be _-cerp_eted
u
fore_4_
ezchmqe
it
_e
che $1_),
ezporCen
_ecelvea,
o_ .M_-:t_.
is actuaZly
pro_ected
Yiaa.G.y, Usa SEK es_4=.-te
peua_Cy on expo_cs
By creat:bst
ed_mcZy.
pro_ecr_u
in e_ecc
/nposed
betsmmsthe frJ_
z _
and _ha Olaf, (spec:Lt_:Lc,s_y, a' 1mee= off:Lc::l_t _ c=ue value,
in 8eJ_
protecc_m
s_stem.
the Se=exal
system.
use as z _ut-of_
of protec_m
the /ndust_y
or pmml:bmd by the p_oCec_
is its
effec_L_
the absalxsce
shays
of ohm SSLo bea_tes
_rich a O_C 1ram *_hartCha SKK
t_ _
co Che derree
does no: t_Lcate
A ue_ SF_ nuure
_ore_u
factors
CosC (Dire) criCe_on
_s ptaducSaZ or szy/nS
accordhsS
by the protectims
F_sc
a project
chac tc
ladusc_es
zpp_Lcac_m
ev_uar_n.
implies
£_
t_adable msd
is nOC posslble os: co_ea.t.mst Co d_"L_m spec:Lf_:
in che Do_8_
but it
£nto their
fmc_o=s.
"Ttm_e _ce, ch_
as lC _s ofCe_ dLfficult
(see HedaJ.la, 1979).
components
uould need an SEK estimate
8aods _w.=e tc
or prac_tcal
=a_e, th_
geC leu"fo=
,4_,4.
em_.
1_ is euy to decersdne -hat _ pz=duct Ounce its shadow prJ_e) is £o_'eSu. L_ .i_: is a t:=ad_le, dmz"J.v'JI/_ a spew.:L1[:b: _mve_s.4.on f._tor is s_ple -- £t: vould jmsC be _ ba_de.z' pz_Lmt of the produc_.
-
2. I.
MechodoXosAes for
hcAnat£ng
In the esttnst_Lon
-
the Shadow _hanse
of the Sin, we use the
eupXoyed by MedalXa (1979) fo:e_LSn exchenae.
$
the msrSims], soc:l_d, vLILue of the Xut
•hAcb de_ve8
prococcS_n
t:ba free
inched
unXt _
scn_ture_
ezr_s_io
The dAffateuae
Ruwu
uet_u_l
_81;8 U the Zncorve_f_n
in the three
In cheat zespeGe_Ve ,_mpU_ns
_
fo"_tf4_ ezchmse
trade equAIAbrtua. _
raco_ 8rid (3) Che Opt:l,l_
n_l_
uethedoXoSLU
(2) the Ik_h_-TeyXor
shsdou _je rsco.
thre!
An her study on sb_Jau pricXnl
These 8_es (1) the _
8_ven the present
RaCe (SI_)":
_pp_s
r, Ssrdiq
(o_)
Jl_U8 lies
vitae tw_ls
poX£cy would he. f_Lr81: (U1¢'130)mchod 8_ven, viii
tnhe:encly
r_n
us_mAns
(at leut
he_lz8 ev_u_ted).
takes
thac the present
throushout
_lLchoush Ch£ssppz_t_h
evaluation
vAevpoXnt.
least
At begones £ncous£st_mt
couparat£ve
£n the lonj-t_,
would be e].4-tnated, shedc_ p:tce
l_rthets_re,
"
"
_Ji,
the face t_ltes
-
gh_
fl_ej._ since thst
IOTO pto_Ject
possess
ThAs SnpXAes that
the need for ©oncLnu_
/
-
the p_oJec_s
sdvsnco8e_
8oods and. resources
agsl_m
:ILs8pp_z_jl_
in £soX_tAon,
£8 desAsned to £dent££y
tea1 and l_s-z_n
pz_r_
the l£fat_Ano of Cho p_o_j0_£
used iu evsXu_tAn_ small p_oJe_t8 cou_reheu£ve
the preeenC cmtr_
st
procect£ou
tlme us need Co
chac the present
pg_LXc_
he
ILI_
3JothervLse, £f Lnte_venttou should reflect shadow pr_,ces.
pol£cy
£s opt£naX, masher prates
•
.
' "
.m
•
• .
,.,
- .
'
,.,
:
•uo.r_U_ :
;o. _
, ,," :_. "
..
.-
.
..
_do
.
.., .,, ...,.,.._ ,,
,,...
;
... •
.
. • .
.
"
.
• ....._
:...
-..
.' "
,.
..
,
. ,.. ,...
.. •
.
.'
...,
,
,,,' ,
".'r ,,,..._ "._;.', , ,'.',.
• ...:
..',.,
uo_:_w_o,_d _a
• -..,,,,
•
_-
.. ....
•
. .
_n n _ _.,To, a _ (_ .. /._
.. ,
•
.
_,,.
•
..
_-...
.- ..
..
,. ,'
.:! .,'.y,,.,_..
._, ._
_u_ .,
.. ,,
J q-aug "amTl=s=.u_l_s, ,,w!:, .md_, ,_, np oTq'm_d
"';'._/'_,
'..".
_ _.. ',.'
.o,.,".',
,'" -
'_ "
_ ..
, .,_.-_ ,,
,_ ,,,;
;:L,.- . .,, "
"'
_
.... ",'._'_}'"!'.',
"
,_.,..-
•
..
,......
.-' • •
..,.
" -
_: ,...,
_ ,.: •
(C)'Pm _._:_;_ ou_:_=-;o.,am_---_;... ,".'
.
•u__
" .._,'''""'
".i_
",.
" i"
°'.
'.,
'
'_
".'._
'
;'"
.".
_-.-_ao ._ _;ou=o_oeo,
..:__,
._]r.=_n:o;_ :_qamoq p,L'.m_oq-._,,.a_.._ •_
_'t"_
.mrr.,_mum :.me.u_t "=:w 'arwSs'n:_p =',m=a.,.=i_
/
.,..
•rumao oq=_ _m._.4o-; :_u_ mmu,n ,e.t=_rXdEr :_ ._toe
• lpqSanl _O
wq:j _
'n(_a,T,_s',T,..,.anq=aq[) _lo=d4aJ _
•.
• (,
-
amq,T,
"US • oq:l ;0 o_rl=n -. ,,.,
...
_m mn_; amwh_m_a_w-=mu
:_ameu_ q_T._q'_'-.,J.:o='.=Ul:Odpue:_8 _
m
-
These thzqbe apprJschms yield
7
.
mm
tk_ toll_Jn_"
form_as
for escY_mCfm8
tbs _nf (I) The_
_t_mr_
(a) smtl
Et dui (l_t)
'_r' •-
+ JEdXj (J_SF__
z dnt + _ dx-t j. _
•.
v,_heze.dH'l and dXts are ee_rliMl eT_o_c
rupectSve_
fore_n
ezckaase.
srisi_
.
•
¢lwusu
t.a isilm_tl
f_am m addit_u_t
____4_of
_he Y's and SJS 8re implicit
taz_ffs
subsidies (export: Cazu) ms iapor_bXes"ad ._ies, zespe_Ctve_y,
ThLs _ormJla cam bo rawr£ttem
toads eJ_sctcic_es (b) 0_
E_
_
T.ezqts of
u.
Mi
+ Z tfj
X_(l_)
( I+Ti)
uhere Cfj ". I;ha @_ssCi¢i_Cyof NpP),y Of fore.tl_ frc_
Slit
•
.
eschsnse
ezpoz'c of coumod£cy j
_z.i (_sj .-.1) nxj + Cxj
rtxj -export
Supply elasticit'y
._or comttod;Lcy j
¢_j - export dew_ e_s=ic_ty (l-_ absolute_=_=e) £or cc_modicy j _L
" import: deEand e_Lsl:Lcil:y (ie. absolute v_lue), foc coumod£cy £ i"
ass_d
('rt _
:n_7.)
l;osethe_
£e _epresemted
LI
_onn_ usedin ch_ e_
ua._or ezpocUd_e8 _lUr,
exporCab_ea Th_
r.hac ehe JJport supply e_Le£Cy
_e 4c_
luupa _
..
_,_
and et].]. _upo_radJ_ee toKel:hmr. by"
SV._ (c)
_
.0 a I (I+'S 1) +.12
•
(I+S 2) + a 3 (l'¥r)
. c._]. xI
..
_':" "z " c_lxI_ c_2.%, %M
_d subscEipcs
!. and __refer
co ..-_or and m_.nor mcporCab_e_s
re_ecc_veJ.y (2)
The ILucha-Taylo_ i_sC£nmce The aeneas1 (a)
SEK2
_ocuuLs is SLveu b)':
_ (l
_.e_e L_
l_ (I+S_)5,
_e£er's c_ produce _-er
over aZl j's.
oL?__'s and J_ r_e produrl:
•,-
g
,,,, .
11,_ Hj.
_-
mad
, lrmr _
study.
_
n-N-'mi
_
J c_j x_
_oemuXa used Is
Co) s_, i" (l_z)az (Z_z) a_ (i_) (I-_:) nol:al_OnS ante tl_
sameas before.
The.fomula used for r_e study _l;_tns I_ _¢h_.
esporudGes
_
_w
Thus.
•
_ (l-sz-.Sz)
•
'% vbere Sf , SJ andT' ue, the ma_i_ (_mrr u=) _orus:jot nb_Ldy (ezporr
mi_cCablu,
LspL_e.tc r._Ut _muJtic
sales
tJx)
for _orr_lea. tax _I _=
for n/_or
ezlm:rabZes
respec_Ly, _
__
md v' _e.
___
IPor r2horest. o_ the notatJ_ms.. vx -
douestic
v-
dawr_
_.ts
._.
cm ezporr, ab1,se
sa_estax on/_p_r_es _o: i - 1. Z %i. "--°dli- "_
xL
end
ca . ..,
,,,m.O_. 1_ I/..
and
eyet.ea.
-
vhere
-
elestici_y
of home demend for
aporuble
e
-
elAstic-icy
of hone supply for
£upo=tsb£_
Dxi
m hone demand for
ouporcable
-
S_orcsbles
protection
houe supply for f=ou Pover's
($PPP, 1979).
& uuLfons _arL_f rate,
the ratio
J_StiCU_
£8ports,
£_lnitely
frol
each other).
"I - .._
_(1 + t),
namer export.
• export
Of _
rN
to the. _tde_
fo_ the 8eneral
tttlS
tex,
This vould reduce
in border prices the specJ_£c
from that
for
of
minor exports. than n.
_)
]
ere Mt thet 8restly
equal
st demand for
revenue
e£fects
to
_se
dmseet£c prises f_
the .s_ot
border pr£ce of the taport
terl-of-tcs_le
that 14 vould be much lover
prt_8
exports
ar£ein8
(less the_ lull ,nlte) de_ud eiaeticiL_V for m]o= differs
(1-
£8 umma4
m_or
the reSative
of uarS_sl
to the
[, or.
hlgh and do not di/fer
_4_ere K t8 the elasticity
the tax to the ratio
In e_fect,
(It
t x, on _J_iv£dual
to
of t_Jd8 _i_¢s
that demand elastJa_r._eg
are Se_rsl_y
2. An export
to
p_Lees of udao: ezports
srea¢ even for minor exports.
elesticLtie8
fo_ rati_n_
.....
rSt_O
from the fact
these
after
frsae_rk
equal
_n border prices,
This sdJuats
that arises
t,
of doaestic
tO the
frou uLuorexporto,
£
I , .where m is the s-1 of demmd for -4,-,r Uports, _te
•
mmld reduce
i
This is butcally:
eetJxssced averase elasticity
_Ort
-
edx i
For our OIS, ve dr_
1.
10
from s
expo_e
Tt iS SeaetaZly
subst_Ltute,
gh/ch
expected
-
3.
A zener_l
imports
in
p_ocess. are
destination
and deueet£c
included
the
11
sales
selling
Hoverer.
price
the
Kiven .credlcs
for
taxes
principle
value
added tax,
revenue
purposes.
This
at
sellers
for
-
any ecage
st
of
any stake
pald
in the
v.
on
iS
tax
the production
of
the
inputs.
production
Thus,
the
effective tax is equal to-. vPj- P'I aljPiv:" v (Pj - ZiaijPi)vhere PJ is
• the
prlce
price
before
of the
tax paid), value
input
and
added
tax
.tl_
Is
4. a tax
for while
aij's
are
Pi
the
the
Moreover,
is
(l_v)
amount of
input
domestic
eoe£ftcienCs.
the effective
would
sellins
the
pr_ide
sales Thus,
uniforn
a neutraA
only
Value
ueans
for
revenues.
c=edit
to exporters
equal
inputs.
_4-_r
vP t is
industries
Refund
tradable
(thus
taxed.
added tax .across seneratinK
of the output,
t proportion
This
exporCs
avoiding
to
to
of duties of
would reduce zero
(since
on _nporte_ the Value
inputs
and.
o_ domestic
the ef_ective_$etecttoa
the v'e
dlscrimAnatlon against
and t's
the use
vould
be zero)
og domestic
embe-
ttcutee. 5' _rket
Direct £ailuree
subsidies such
(or
as those
tax
credits)
discussed
co correct above.
for
other'
•
Usiutlly,
honver,
ue I_r_=oSseou; diffeL'ln8
heteropneous
from the _ported
sad t_
rates
the vedse atisLns
qu_Lty
and price
Thus,
from protection
_Ltve use the known tu:Lf!
is it,iron by
vhere
t -
the _
tsriff
f -
the pe:r.entsge
n -
mszk-up rate
c_ee,
Yor these
for the nco-homosoneou8
8rid Paver,
8rid _
T, for _ortsb:l_8
8 Stoup of
is a aonbLuatLon of both
(See lled_ls
rArLff,
export
2.3
products. si_.e
subotl_tes
or :avolv/ag
product,
are prderrod
differontLs_s
.. and for exportablu,
.products, ,QomaoclttLes
eLr3_r Lnvolvtns doaesti_ iuport
but eZoseZy subetitutsble
knmm teriff pods,
-
especLaUy for umlu_8_tu_ed
I.e.,
Ln quality
13
rste,
1979).
the _lplLcLt
rste
tax (sdvms
the J_pZt_lLt tetlff
88Ze8 tax rite)
v_L1 be the (neSst_Lve)
tsJc,
Wei8htin8 _1 tsz:lUEfs
ZuplLc_t TarLf_fs three estLmates ---
lscha-T_lo:,
the
o£ the SER 8ze veLKhted ave_nses
UIIZDO esttmste,
s related
J veishted
8tithIBt_Lc
• ought to be £_ _
Yor _U
_
chm_u
in exports
tn_Jff8 defZsted by .what
the _de_L veLsht8
to use _e
These .dependon trade eluU_Ltius
of .expoSe and iuporte.
_so
optLua_ _nte_wontion s_wten.
q__,
imports 8rid mcporte,
nerqe|
seometri¢ averese_ and the OZS-Sn,
a re, shred Seo_tz%c avez_q_ebut of iaplicLt •they
of _spZ_e:Lt
=aki_
and Lnports
vo=ld prices as sirra, can be expressed
the uarSLn_
sad the levels the nuSJ_L
L_ trams of the domsetLe
-
supply
and demmd
produ_tton,
elasticities,
exports
e_
is
elasticity
-
ra£e,
drr
for
value)of
f
. Q-X)
total
dr -_
edx + Qsx
, 8iven
world
prices, prices,
system,
hapertables
equals
supply
exportables
supply
_uus
we s4,_.l/fy
2Q - X, respectively,
The weightin8
equal
syste:
to be equal
deBend elasticities
• 1.5 Q+M for
i_ortables
used
and 1.5
denote
further
by asst_Ln 8
We get wei_ts
dete0r_hled ,
But since demand for
(q - X), for
this
coees
i_ortables
£n Medalla
and universally This
also
(q + M) and denand
iu_orts
exports
£n elm
dP/P.
to be equal.
plus
chan_e
would
supply.
and Q - X,
/mpor_ables
by relative _,_q of supply and demand.
elasticities
'
to damesttc
The percen_ase
in domestic
elasticities
of 2q + M end
for
iF
q refers
demand for
exportebles.
chanse
these
des_nd
eda+Qemn]
exporcables,
•For our we_ghtin8 of
_ports,
elastlcit7 for expor£able8 and eex" the
O + M denotes
percentage
all
absolute
dr(Q+H)r r
whets edx is home _
e:dMmge
for
of.:
"
dX
home desmnd for
values
-
(in
For exports
Bence
For instance,
and
dM =
supply
w:lLth the
:
drlr
the eI_ticit7
iwort_les,
-
together
and luports.
-n. -
vbere
14
(1979) one half
yields
the welghts
- X for
exportables.
for
to Weights and exportables,
assumes
supply
the value of
of
-
supply
Setting elasticities
was
categories the
of
World
clear
vhy
output
influenced
If
we
supply
elasticities
than
could
be
studies _uld
generally
_tning; some 4
be
and
be that
factor
for
Rmpirical
Results
further find
greater
d__d
the
data
X, value
we need
of
estimates, special
exports, ve need
cases,
available Revenue
the
Code. Intervention
These
include lumber),
assembly
end
book
Tariff
and is
policies mostly
end
some
parts).
_anuÂŁactured Estimates
of
assumption8 example,
fut_ce
_muga_tu_
aKrtcultute be
implicit
sad
greater
by
ta_fs
and
prices.
(in
tax
rates
and
the
homogeneous
than
tariff
and
related
and
comparison
border
and
(2)
is
in
readily
products taxes
prices), tariff
National
products (e.g.,
veishts
hnplicit
For
The for_r
Code
price
the
production
products of
restr_ture
2Q + H stud
To derive
and
asricultural
in
of
tariff
other
to
dm-_nd
essentials.
est4Mtes
for
than
in
generally
_ports.
used
lowe_
For
than
Customs
is'" not
elasticity
factor
of
and border
The latter
pr.ice
and
the
(1)
our
eZasticities
averagins.
value
by
approxi_tion.
SER,
for
It
lonK-run
supply
on Q, value
domestic
from
for
and H.
the
various
,Accordlnsly,
would
we need
to
used,
that
tha_
velghts
be
the
elasticities
their correspond_
in
first
by some
SER,
hoverer, be
demand
used
often
8enerally
easier
of
for
dtaasgregatÂŁon.
non-essentials
TO estimate
view'
realistic
for to
and
de_md.
estimating
values
estimates
long-run
in
able
the
(1971)
should
a more
diversified a_Kht
a
t:o. restructure
work
one-half
elasticity
it may be
2q - X may represent
future
at
by Balassa
take
Indeed,
For
by
given
Bank.
rather
-
elasticities
K_)ds
elasticities.
15
Internal where
are (e.K.,
automotive relatives
in
effect. logs
-
were
mostly
derived
agricultural PC_
(_
made use
is
exportable,
+ _
" Q - X).
five
and rounded
denoted
sector
_,
Using
an average
implicit
implicit
correspond that
(1)
with
_
domestic to higher
_ports
of the
the only
Z-0
table
a sample
average
implicit
taken of its
X, _,
has
high
is
is
this not
tax.
w4th H --
is
weights, the
,Yor _
rates
would
_plyÂŁns
would be _portables
negl4gible)
those
a pure
For X and _,
tariff
a
subject
and (2)
actual
to lover
tariff
negligible).
project bean
of commodities tariff
hence, Hence,
to _4ddle
sector
by say
to derive
export
oÂŁ the
would be for
multiplied
considered
M and _
production
(imports
0_,
exported,
output
I-0 of
The result,
can be computed.
that
part
to be 4reportable,
rate
sector
t_e
on
_h_ch
each
importable,
decile.
low tariff
tariff
which
computed,
and the
production
At the
is
tariff
assumed
subject
(domestic
yes
is
would be the corresponding
was generally
for
Thus,
Table
T for
determine
Co be the proportion rest
products,
Transactions
part
X/Q
the resulting
tariff
to
nearest
20 percent
exporter.
(1983_
(BO_) study
tradable
an average
and which
The ratio
taken
exporting
C. David
Investments
I-0
To get
down to the
by a, is
e.g.,
ell
1974
was used
= a (Q-X) and the
it
of the
a rule-of-thumb
(Q-X)
--
products.
Q, X, end N directly.
sector,
works
we would want to cover
(1979)
gives
-
and the Board of
automotive
Ideally, Nedalls
from other
products
for
16
for
was being constructed. to include imporcab_es
done, Thus, in the
a newer
version
of
we decided
to use
derivation
of an
and an average
export
tax
-
for of
exportables. whether
lent (2)
to it
is
total
in
is
percent
exports
ation
it
--
a major of
a major
production
-
The commodities
(1)
one
17
the
year
the
top
20
of
gross
The first
is
set,
(or
so)
output
is
year for computlng
the
both
Medalla however,
a minimum for
the
level
or at
(3) the
to i_
as
level is
one
ie'a
there M.
For
described
to come
equivaset,
percent major
4-digit
or of local
(ASM)
classific-
Trade
Statistics.
Survey of Manufactures
The
(ASM).
this was used as the base
three
1lets are then combined to form
the final
cozenodities.
list,
X and
basis
set.
ASM is for 1979,
the weights.
the
year
I for the llst of conlnodltles used)
llst of selected
have
on
two lists make use of the ForeiEn
Since the most recent
In
--
a minimum
The third makes use of the Annual
(see Table
selected
imports
--
for
terms
import
total
export
are
would
still
these
cases,
we
follow
Instead
of
multiplying
above.
up with
be
proportion
cases
where
a sector
the
exportable,
method
used
X/Q by and
would by
5,
we multiply
by 3.-4/ Finally_
we need values
this study, we have We use a range _,
ranging
the elasticity
of values
from
for trade
estimates
for elastlclty
2 to 6, elasticity
from 3 to 6 (both z_Lnor and major
elasticities.
of
of Balassa
of demand supply
exports)
Agaln,
for
(1971).
for in_orts,
for exportables
end elasticity
of
--4/We took a s_le of export sectors (e.g., coconut oil, plywood and veneer, etc.) and confuted the X/Q ratio using 1974 T-0 data. This was found, in the average, to be close to 33 percent.
d_-d for
for
_jor.
assumed
-
from
6 to
11,
World
and world
de_umd elast£c£t_es
for
to be Inflnlte.
Correspondingly,
_por. ts
exports
-18
values
for
SER/OER (See
taking
consistently
lo_
teutly
high
we have
These
estates
2).
values
of
Hence, trade
alnor
we get foz
elaet_d_t7 exports,
a rsnse
rare
of
the 0N_DO esC_sate,
elasttc_t£es t
to consis-
SER1 ranging from 1.269 to 1.314. OER S/_tZa_iy, for Bacha-Taylor method, SER2 ranges from 1.245 to 0ER 1.291. The OIS-SER estimate ranges fras 1.09 to 1.114.
It v_ws
values,
Table
supply
are based
the present
as temporary
eietgen_
on the
foreign
scheduled
exchange _d
measures.
1983 tariff other
trade
rates. controls
Table
1.
19
-
List of Selected Commodities to be Included •Calculation _rith Corresponding _pllc£ts Production, Exports and Imports
Cm;modi-ty
Production P in border pri ces* 1979
Exports P FOR 1979
Imports _ C]F 197_
in SER Tariffs,.
Imp_icit Tariff lq83
Indirect Tax 1983
-%
Abaca
357.3
IS3. I
.
- 04
.01
Copra
860.6
652
•
-.075
• .01
,4 3_
.
-. 04
.02
Coconut 0il
7,025
Desiccated Coconut
1,012.5
78_
.
-.04
.02
4,003.2
1,552
.
-,06
.02
2,688.8
I, 45 ._T
-, 04
. I0
1,907.08
I,I:,9.7
-.04
.10
3,765
3,222
-.02
.
- .04
,
-.04
.01
-,C?
.01
•
.05
Centrifuge
& Refined Sugar
Lumber Pl._mod
& Veneer
Copper Co_enurace Chromite O_e
237.5
16_,
Pineapple
]66.6
703
Banana
--.'_077 .08
Tuna
252._
252.4
Shr/l_tpa
263.-6
263.6
Wheat PertJlifter Mfg. & Ass_bly
732
•
.
-.04
,05
932. O_
922,8
+. 25
.
936.4
752.6
+.32
, I0
755.5
+.25
.
of Motor _'zhicles
CgL (H) CSU (Assembly) LC (components) (20Y.) Textile Imp°r cablesl
. 5_5._ __30.6
•
2,923,_7
•Exportabl_s
_63.3
& Paper
.
.
•
Impor cables 2 Paper
•
I11.7 . 15_.5
+1.00
,30
+.50
,
+. 10
.
+. 69
, I0
.
.I0
Produc_s
Imp°rtabl¢
s1
buportable_
2
, I ,'_35 ._
505 ._ .
+.lO +.80
. I0
-
Produccio_ P in border prices* 1979
Cmwod£cy
lioQd Manufacture Pe_roXe-m
20
-
_.porcs P FOB 1979
l_porcs _ C]F 1979
4,808.7
260.7
.
5,894.5
.
_,6_.2
2,390
.
lmpL£cic Tariff 1983
Xndirecc T_ 19_3
- .08
,10
+,20
.02
_£inex_es
Xaporcab Xes, - Gasoline
& ocher
- l_esel
o£1
_£gnc
eiXs
& othe_s
• zpor cabXes Produces
79.5
1,_9
79.5
•
•
•
. IO
.
A4.9
.26
.05
21.5
+. 91
• 10
•
•
.10
14 3.6
+. 10
• •
.91 •
& CoaX
of Petroleum
IS. 3
XmporcabXes] lmpo_cab le_ 2 14fl_. of Wear:Lag AppLrel Yootvear
IZ2.9
15.3 I_xclus_ve
of
7.super.CabXes
.
Exporcables
881.6
1,591.3
f'
o£ Glass
P_S.
lmporcab
_ G_LnssProduces
les I
.
X_porcables2 Y.xportabZes Nfg. Flour
34 6.8 1i8.5
of Pescicidu, l_]J._.ng
ljalmrCables
Insecc£c£des,
& Ocher
Hfg.
etc.750.1
of
Fru£Cs
880.2 & Vesecables .
Y_porCAbles
1,016.9
of Processed
_,_ld
& _£ry
+.35
•
39.2
-_. 20
•
.
+. 69
.05
40.7
+. 80
.10
730.8
•
•
.10
Produces
I
I_por cables 2 Hfg. of Soaps & Clean£n8
132.5
925.7
.
809.6
+. OS
.
.
+. 69
.
24O. 5
+. 20
Preparations
?
Imporcab les 1
. ]0 .10 "
Grains
Imporcables
Isuporcables
•
I
lmpor cables 2 Cann£n8 & Presecving
l_g.
. 39.5
•
.10
-
ProducC£ou P Lc border prices* I_79
Cemm_dity
21
-
Exporcs r FOB 1979
inpor'_s P CI¥ 1979
!mpLid._¢ Tariff )983.
Ind_ec_ Tax 1983
Hfg. of Soaps _ C1_ni.g Prepazacious IJmporcables2 F_porcablu Iron
& SC_!
. 63
. .
.
! ,363._;
+.OJ
.
464.2
,
.
+. 69
.10
.
.
156.l
.
13c.5
.
141.0
_.24
.05
9.4
.
15.1
+.b9
.05
.
.O5
478.2 189
lss_
!ndu ;_W
Zmpoctab Le_1
•
Imporcables 2 Canning, Presexv_J_. & Processing of Tish Imporcalzles l_ckexeJ.s& Sardines 0 chars Imporcableus
xwc g: Zxpor
• I0 .05
209.7
69.9
.
.
e.s
t_a_or ]_xports
-. 04
l_t._or ]Ezpo_cs
O. 0 +0. q8
lmportahles Foocno_es: 1.
symbol m
2.
_ symbol mean£nt_ (-)
3.
For exporCables, • e_port
export
tax and (,) for impor_ car
quanci¢ 7 o_ p_oducc-.'on
based on average
Q/X =at£o
of
_s approx£ma¢ely
Chre_- times
sample pure-ccporcables
che
value
.from cbe 1974 1-O
cables. 4.
Imporcables
I include
inCermediate
5. 6.
imporcables *Production
2 £nclude products £n border prices
b.,1979 implicit car£ff.
iapucs
_¢ich the
lower
aC chair hi_her s'.zge was derived by deflecinS
of
tariffs prodLscc_on. 1979 val-,e ot
produccion
of
-
22
-
Estlmate of SR__/OER, VaryinS Trade Elasticities
Table 2.
I : UNIDO _fxl.
_'fx2
1.67
_m
3
6
2,14
3
6
2,5
3
6
Taylor
SERI OER "
_
SEP,2 _
1.245
SE_ OE&
..;
1.090
i
I
2
1.269
6
1.382
1.365
i .151
2
1.185
1.162
,. 1.047
4
1•288
1•26_ "
6
1.332
1.311
2
1.260
1.235
1.0B6
4
1.338
1.317
1.127
6
1.376
1.358
1. 168
2
1.199
1• 175
1•054
4
I.282
I•258
I.097
6
1.327
1.306
1. 121
2 4
1 • 253 1.332
1 • 228 l .311
1.082 1.124
6
1.371
1.353
1.145
2
1.194
1,171
1.052
4
1.278
I.254
1•I00 _
1.124
1.095 E
;
6
1.324
2 4
1.235 1.317
.6
1.358
_
1.339
2 4
1. 183 1. 267•
1
).. 160 1. 242
6
1.314
=
3
3.53
6
I"
I
Cfxt
1.119
1.209 1.294
1.073 1.116 1.138
i
1.046 1.089 1.114
1.291 ....
]iotes:
1.302
,
,..
A
_
t
h
" supply
e_asticity
of
foreisn
exchange,
from major
exports
rfx 2 - supply
elasticity
Of foreign
exchange,
from minor
exports
._
- demand elasticity nxj(£T.j'l)
CfJ
"qxj
+ Cxj"
for
imports
nx ., supply c x _ _orld
As susp Lions I. World supply elasc£ctty 2. Norld demand elasticity
for for
elasticity
for
demand" elasticity
export:s for
imports _ inf£uite minor exports is tnf4nite
exports
-
Although of the
depending
t]atee
recomaends
estimates using
t_es
u_asures
only
the wedge
For the period
considered
Hence,
the
S_.
On
arisins
to be aether.
on the purpose
first-best
•of 1.114
distortion
aris_8
1979).
in the
This,
IPPP study
recommending
around
The estimate
using
1.974 is
hm,
(1974),
the
$Elt
was considered
to be at most
for
study'
Car£ff_tructure.
from a BOP disequilibrium
NEDA has been
the
any
elasticitieeS-5/est£mate
from the
Zt was estimated
yields
of the evaitmtor,
highest
(See••½edalla
(The SER/OSR estimate
5 percent
-
may be deemed appropriate,
the the
23
equal
to 5 percent.
1.2 x OER as
around
1.16,
the
plus
1.2.)
of the wedge between
SER and On
created
by a BOP disequil£brium is calculated by .eA/_ - A*/_* where is the present trade is
equal
to
obligation
debt
X + n_-
has been
For 1982, putting
tf
the
deficits,
trade
Per
For
1983,
conservatively deficit
ouc study,
outstanding
estimated $3.2
may net then,
deslred level and
the
reached
, A to as low as zero
seals.
A'the
foreign
at $25 billion.
billion.
even be enough
we conservatively
Thus, to external put A* at
geEo.
-_/Since our concern particular policy resiae, relevant.
is with the the highest
long-run effects of a elasticities may be most
-
Uslng
the
adjustment ponding
is
trade
the
The longer
is.
the
short
a very
from
the
Although run,
the
S_/OE2
The •Shadow l_iee
3.1
Deriving
the
ment.
It
el•.,
(Dassupta,
equal
Rate
etal.,
the for
_n the
the
ezcha_e in
obltsatJ_s, Hence,
of the
we take
wedge
structure
(Investment) of Discount
stream
referred
shadow price
1979).
¢equi:ed.
a BOP difficulty
be viable.
to (1.114)
of saving
_ucome
has been
(SPK) and the
trade
azisin$
6-/
of Saving
The shadow price aggregate
the
and the
(1.081)
- 1.204,
and the
SoCial
BOP that
1' 204.
Social
of the
chanse
of foreign
of protection
then
and low trade
hisher-would
sustain
level
corres-
we can wait
required
perhaps
1.118
edJuetlent
lo_er
as our estimate
effect
equals
3.
et
the
may not
1,08i,
is
the
rate
The hi_er
the
high
to
assumption
consideredp
BOP disequilibrium.
disequilibrium is
the
solution
The combined
1.0_
rate
Thus,
we can
value,
from
exchanse
exchange
lover
given
lons-tun
the mlddle
the
be.
BOP adjustments,
required
respectively.
period
elasticities
the
elasticities
lover
tun the
-
to range
assumption,
elasticities,
rate
above,
estimated
to high
elasticities
trade
formula
24
S4,4lar 1972),
and the
(SPS)
is
generated
tO also
Little
are
$hadma Price
the net
as the
present
found
shadow price (Manalaysay in the
end Hlrrlees,
in
D_t
of SavinS Value
by _1 of mazglnal
of investment
concepts
Race•of
invest-
of capital Rautilta,
UNIDO manual
and Squlre
and
Van der Tak. 6--/This differs frum our procedure in the case of the protection induced distortion because we consider the effects of a policy regime as if it were pezw_nent, vhlle the BOP deficit is 8cmeth/nS that must be corrected at least in an intermediate run.
-
The formula
25
(Manalaysay)
-
4s:
SPS = q'.sq t-sq where rate
q is
the m_ceiual
of dLscount,
of cepLt_,
and s _s the
In Mnnal_ysay's then adjusted
product
etedy,
q m
coaelstency
for
The Ee_es-U_._:ey
eaviug
£ £e (:he soc_l
retLo.
eettmtad.mpi_cally
w£th the shadou wage rate
(S_t),
(K-R)z_le
£_q-n l+n where
n is
the
to estJ_ate from
expected
rate
to 1,
an upper liuit
a. projected
rate
end an arbitrary
of Stovth
8smmpt£on
ut£11ty of consumption
The q used
.
£n the
K-R rule
c_p£tal,
a hypothetical
Th£8 led edjuatlnt thet
reflects
This
vould
rationale
der£ved
w£th the to
the
per
velue
capita
the
from
Us
was used _
eet£metad
of conmmpttou
elut4a£ty
the
the actual equ£1ib.rium
(S)
of mnr81nnl
adjusted
q.
marS£n_
product
va£ue,
However,
adjusted
of for
_.
the queation£nK
of q for
k lov_
about
t=gh
is
consistency
K_vth
(h)
the K-R _ule not
of population
of
be replanted for prev£ouoly
returns
from
by the foliOrl_
need
for. an7 such
We want an SPS and an t
any purpose. real
the
£nveetmeut
actual
and reinvestment.
unadjusted
the adJuatment
q.
The
prnaedure
-
was that
since
ve must It
we were
value,
that
we should
segregate
It
=18o adjust
(distorted)
asaln,
we do not want
actual
(distorted)
with
for
If we use government
is
satisfied
the
savings
q taplytn8 •(savins led
we are
level
is
£s
su££tctent
Still.
doinS,
This its
some more about
there
of
based
adjustment
on the
the
for
assmaing program,
in this pol_.t£cal
consis-
This
the
or at least
i.e.,
regard,
and other is less
epparent
than
contradiction
a prem'Ltna on it role
that
the government
an £ that
the E-R rule
over
og populatinn
takes
may be more consu_tlon
consumption
£s postponed,
it.
although
Hence,
mainly
constmptton)
_ovth
evaluation.
The derivation vhtle
based
values
means that
us£nK K-R, we get
we place
us to think
but
iaplicItly
given
t8 optimum and yet
an equilibrium
of q, £ and SPS.
best
than one.
not
For SPS and !,
an optimum savt=8
it
equiltbrlun
an assumed
labor,
the
estimation
an SFS 8rearer
in project
that
the
is
its
o£ capital.
ve elJJntu,:te
study,
thk K-R rule,
that
toward
of labor. values
in dteequ£1£bt_,--,
wlth
of htrin8
pcoduct
optt:mm proKram.
constraints.
waSe rate
n_u_g_-_1 product
has implemented
• constrained
cost
equ£1ibziwn
the ,SWR from
t8
But our S_
social
warg£nal
this
to be cons£st_t,
q in accordance
function.
£s the
labor
The economy
4_ we move the
on the
Thus,
-
surplus
capital.
production
wage rate.
tency
assua£n$
assume scarce
was thousht
26
theremay
_1 of investn_nt
also
Into
account
£n the
future
be more people
v111
yield
the If
fact present
to share
q £n the future,
-
27
-
the actual rate bof growth of per capita consumption is only 1l+n+ q
-' 1. -7/ Zf the
saving
pro_Tam
(and thus
the ¢onsu_Lton
path) is optimal, this must be exactly offset by the rate of discount
applied
to value
K-R rule
derivation i_
of future
of the
social
q-n
l+q.1"
l+n
l+n
consumption. rate
-8/ Thus.
of discount
the
ÂŁ8
What the above argument also points out is that we cannot toe,are the values of future and present consumption directly. We nust values
adjust wtll
who share
them for
differ in the
population
in accordance consumption.
differences, since the with
If,
for
the e!-eker example,
of people a loaf
of
bread Is shared by t_wopeach gets half a loaf which has 8 marslnal utillty Kreater than half that of a whole loaf.
!We assume a constant
ratio
of 8avinK
to (_P.
--8/Otherwise, the marginal social Value of cousumptiou foregone in one period will not equal the marginal social value of consumption gained in another period,, implying that social welfare can still be 4_ptoved by a red_trtbutien of consumption _ different periods.
-
A problem analysis,
does
income have
arimes, not
be shared
a value
different
growth
were
zero.
_ equal
to
Thus,
under
rate
rate the is
put
for
progr_,
future
values
procedure n plus
the by the
Thus,
•. q*- n l+n
+ n.+.
•. (q-n) (l l+n -
growth)
q-n+nmq
is
rate
n
in
practice
B.
:+q
social £1ows
i,
That is,
the
the Value
social o£
grO'dl".h. This is
not
irov_h.
of i instead,
an opttsmm
n
=
to q.
by both
of population
under
q., .l+n
equal
population
the Value
n
end
B
income
o£ fall
conventional
and adjust in.
(n).
appropriate
o£ absolute
and the
since
.
Hence,
.:+=eq-n
the
the rate
(consu_tion),
very +convenient
we add to i,
=
to discounting as
population
we get
a stream
defined
if
by n and i,
I+
population
£ut_re
growth
B
saving
that
t_rns.
of population
I
(i)£or
capita
Q
(B) both
project
i_w_ome8will
would apply
them in per
-1,
an opc_nn_
numeraite
that
which
rate
fact
Yet future
benefice
_ = q is equivalent
discount
the
(i+=)(I+I)
of discount
follow
that
:B
unadjusted
setting
from
(l
o£ discount
(i.e.,
conventional
by more people.
future
ib
(i+i)
because
consideration
che_ by the
If we Chert discount
• BI
into
We ut
we must discount
define
however,
take
will
28-
.saving
to We can i.e.,
program,
•
-
29
-
A
We now substitUte q, SPS is under
_ for
equal
the
Co unity.
Keynes-Ramsey
contradiction
noted
The question of
an opt_um
others,
the (1)
relatively
_nvestl_nt. in project between
that
savin8
figures.
and
one.
suESastlng (3) a question
Finally, remains
is
inefficSency
of
rather savin hand,
surest much usa
that as
of
it
that
should
for
should. saving
in
predominate of income
S.
are
study
by
over-estimated balance
is
the in
badly
in
IMF suggests
the
official
deficit,
saving.
saving
the need
for mare
we should use project
(at the expense
and monetary
as instruments
its
than the dlstrlbutlon
a recent
trade
addressed:
despite
as the
"Among
a
miEht
saving
existence
indicate
considerations
as to whether
Fiscal
be
data
••This
even if we 8rent
as means of increaslnE
appropriate
income
income.
invest_aent the
should
for the Philippines,
a need for more
of investment).
is
Philippines
other
equals
The apparent
important
end
t
we assume
optimal.
a very
be
sinc_
if
program
efficiency
Moreover,
is
be
the
national
to
On the
saving
considerations
the
consu_tion
should
and
we assu_
evaluatlon,
(2)
that
what
it
SPS,
disappears.
capita
Thus,
is
for
not
ratio
seems
This
formula
or
official
country,
the
to whether
following
mow per
The problem
above as
saving
in
rule
saving
The
very high
a poor
±
savln S, evaluation
of efflc£ency
policies" may be more
for increaslns
8avins.
-
The first program.. _plles, need
Justifies
Hence,
not
use
used again
to
increase
of an optimum
- q and SPS equal
discount
of capital
if
saving rate
Thus.
in project
saving
to unity.
The '_hird
may be sub-optlmal,
different
project
saving.
predo_nate
SPS must
i
that although
a social
productivity
-
an assumption
we use
however,
30
selection efficiency
evaluation
froB
we •
the ,mrginal
wou_ld not
be
consideration so that
should
_ equals
q and
be unity.
Zf we assu_e, can be used
ou the
to increase
other
saving,
hand, the
that
project
second
implies
evaluation that
we
A
would need different
to eetilate
a social
from q (and thus
To do this, an independ.ent
of discount
an SPS different
we can use estlNate
rate
of
two approaches. the social
race
from
i which
is
,nity).
One, we could of discount,
i,
add to It, I plus in, i.e., A
i-i+n+In This, in effect, discounts future incomes by both I and n. The This value
independent however
estimate entails
of h (Squire
i could
be g h, as noted
an arbitrary
assusption
and Van der Tak sugsest
above.
regarding a value
the
between
one and two). Second,
one could
premium on saving
independently
and investment
assume (i.e.,
an arbitrary
an SPS) and then
derive i from an e_pirlcal estimate of q using the formula for
SPS above.,
Hence,
get and
-
31
SPS
-
+
sq A
(We can work
backwards
setting
Then
to
i = gh,
3.2
optimum
and
project
selection
either
we derive quite
that
the
can
we get
arbitrary,
or
as
noted
above,
Estimatins
the study
is
derive Marginal employs
that
an gh,
i
implied
derive
kno_ng
from
i -
to
increase
saving
than one.
In
our
that
assumption
directly
an
-I.
8.)
assmae
SPS greater where
First
If,we
wants
we assume
saving
through
that
about arbitrary
is
case,
h
is
SPS
bound and,
this.
Productivity basically
h.
h,
only
government
from
be
The
then,
i
to
the
we could
The conclusion, not
derive
1+i 14_
of three
Capital approaches
to
estimate
q
--
by estimating: 1)
the
2)
the inverse plus
3) 3.2. I.
rate
of
return
the international of return
The first two methods and will ylelds, study for
only be described is also suggested
due the
to
more
worsening, recent
manufacturing
of the incremental
an estimate
The rate
in
in years.
of factor
capital
shares,
(private)
rate
brlefly
in Manalysay terms
of
(ICOR),
and
and the ICOR.
in detail
here.
ratio
of borrowlng.
to manufacturing are discussed
output
A third
in Manalysay approach
(1979)
-- Stock
(1979) but is not done for the
quality
and
availability,
of
data
- 32 -
Since equalize
the in
_ate
the
long
be an estimate
of
The method manufacturing labor ment
of
run, q
of
second
represented
by
Y
Y
constant.)
is
K
and
The marginal
AK
where
NDP
(_ainly
by a measure
developed
by
a Cobb-Douglas
should
in
rent and of
Power,
replace-
also
production
of
Y
with
L
is labor,
is the share
productivity
in
IPPP).
function
of labor.
of capital
respect
to
Ks
u
is the share (A
is then simply
is a the
i.e.
Y
by ratio
income accounts.
AY
divided
(i - _)
capital-output
from national
manufacturing
f_ctors
is capital,
is then approximated
incremental
in
should
economy.
a method
8Y
K
return
sectors
A K _L I-_
in output
derivative
all
out from the total value-added
then
employs
is the output,
of capital
partial
=
of
for
of all other
(using
method
rate
taking
This
capital
capital
for the whole
contributions
The
where
to
the
involves
compensation). cost
return
Pt-
_
,
i.e.,
the inverse
(ICOR), where
data
of the
are available
Specifically,
Pt'1
It_ I
is net domestic
product
and
I
is net investment.
-
3.2.2.
The In
schedule
International
Figure
1,
and
horizontal vertical
S,
the
be
domestic
gives rate
Rate of
(Prlvate)
MEI
the
axis axis
let
33 -
the
marginal
supply
the
amount
of
interest
Borrowing efficiency
curve
of
of
investment
investible
tnvesttble aud
of
funds
funds. (IF)
and
The the
MEI .
S i
ib
y " "
"
_
II
we assume
nationally) Investment would I2
-
be I1
a perfect
capital will
amount the
invested,
foreign
marginal
efficiency
marginal
productivity
market
i
and
perfectly
at an international
be where
fb II
borrowings of
investment of
capital)
) IF
12 Figure
If
MEI
equals the
borrowing
MEI.
amount
(FB)
will
rate
(interib,
then
Zn the figure, supplied
supplied
(which
mobile
will equal
at also i b.
12
domestically, rate then
tb be
and the
the
34
Suppose, i.e., _.
however,
the _ountry Outstanding
level so that Or the country of foreÂŁEn Figure
that foreign
cannot
borrow
external
supply
may
borrowing
is ratloned_
as much as it wants
debts
may have reached
of foreign
itself
debts.
-
capital
seek
becomes
to regulate
an alarmin 8 inelastlc.
furthe_
In any case, we can represent
at rate
accumulation
this by
2.
S
,S'
,"/ q
.
._I"
.
,
-
•
b
_.,
_
L_ ...... Figure
?-2
-
Suppose
the
represent
will
Investment
economy the
will
can
proceed _
the above
of foreign
E C X.
capital
suggests
borrowed,
rate during
in real terms,
the end of the period, ylelds
rate
interest
an effective
ib Et+ 1
by
the real
international exchange
•3.3 Emplrlcal 3.3.1.
To calculate
taxes,
SS'
funds. equals
supply.
is t that_ the international of q.
However,
X
Suppose
in foreign
currency,
the period.
in domestic
payment
would
Hence,
currency,
is
Et+i,
equal
equal
X is
_
after Et+IX
to
ib Et+ I Et
of
borrowing
should
be
adjusted
changes.
Results
The Rate
following
demand
rate of interest
rate
rate
investible
in t + I becomes
ETX
i.e.,
Then
in ib is necessary.
If the real exchange
which
I I.
a lower bound.
some adjustment
borrowed
12 where
-
could be an estimate
and Ec is the real exchange the amount
of
discussion
it should be considered
the amount
supply
13
be less than q.
(private) rate of borrowing
Still,
only
up to will
-
borrow
aggregate
Wlth FB rationed, What
35
of Return
to
Manufacturing
the net returns
to manufacturing,
items from gross manufacturing
2) operating
costs,
output
3) cost of resale
we deduct
- I) indirect
goods
sold,
the
- 36 -
4)
total
payrol1's
and benefits,
5)
unpaid workers,
6) depreciation
land.
source
The main
Manufacturers Statistics available.
(NCSO).
However,
and 7) imputed
inventory fixed
The net returns
fixed assets.
assets
are no longer
are already
of unpaid
workers
cost of capltal. gives
Using
is estimated.
discussion
of the data.)
divergence
to be estimated
by Manalysay,
and (4)
by Power,
taxes
for 1977, while
for the two years
for a discussion
(e.g.s
to land). by a measure
source of data
inventories, book value
for more
of
cost detailed
is estimated
the gross
18.73 for 1976 and 25.42
is still
etc.).
the replacement
(Agaln see Manalysay
the dlfference
9/See Hanalysay
the main
and ending
The rate of return net of indirect 10.75 for 1976 and 16.17
and returns
Again,
investments,
the method
aggregated,
is then divided
(1) beginning
(3) gross
available
we follow Manalysay
to manufacturing
of capital
is estimated
the 1976 and
data for the later
For the rest of the data requirements, labor income
of
are
for the study, we use only
for 1979 and 1980:
(2) depreciation,
of
The ASM for 1979 and_1980
figures
is the ASM which
returns
and
years(for
of the replacement
of
Census
detailed
in imputing
income
Survey
by the National
1977 ASM due to lack of more example,
labor
of data is tile Annual
(ASM) published
Office
imputed
to be
rate of return
for 1977.
Though
the
is not as great as observed substantlal. 9/
We have
the
of the indirect
tax issue.
- 37 -
choice
of
whether
choose
the
to
estimate
Manalysay,
the
than
sectors,
of
other return.
it
n_
for
very
simply choose
in
1974
be
around
differs
since
somewhat
for implicit
This
converted
to border
tariff
returns.
-- the rate of
tax.
(to
im_llclt
output
tariff
to be the same as
taken
occurred),
estimated
of
.72.
to
This
-- she used the EPR as a proxy cost
replacement returns
to
land
Taking
the formula
others
are
thus estimated
tax and 18.83 percent
the mlddle
an estimate
the marginal
of capital,
and
The rate of return
this suggests
by using
higher
manufacturing
factor
net of indirect
Using the ICOR method, is estimated
among
to border prices
have
a conversion
income,
prices.
of indirect
rate
by Maualaysay,
q
of an average
reforms
Similarly,
labor
of
lower
an average and
For example,
an estimate
for 1977 is 9.26 percent
Manalysay (1979), 3.3.2. The ICOR method
our estimates
from Manalysay
costs,
by
for 1977.
gives
tariff.
is
yielding
estimate
or
is generally
as noted
for 1977 (this is still
operating
inclusive
assume,
years
observations
among, fir_s
industries
and outputs),
no major
.385.
to
the higher
by one plus
for manufacturing
to
two
From
estimate
rates
go
to adjust
price inputs
is deflated
the
reasonable would
We still need shadow
year.
the
in manufacturing
divergent
seems
between
a particular
to _--ufacturlng
return
average
Furthermore,
investments
Hence, we
the
rate of return
With
industries, that
take
of
value q
as in equal
productivity
to 14.05.
of capital
- 38 -
AY = u_
q
where
_
is the share
AY
of capital
in output
and
NDPt - NDPt-I It-i
AY -_
To estimate accounts. Appendix
An average 2.)
is also
we use the data for period
This yields
To estimate data
,
the national
is taken to be one minus employees
in national
compensation
of employees
yields
out to be near
must
equal
factor
conversion
output)
the estimate to 13.82.
_
limit of
value
is added
limlt of
ranging from
u of
and property
payments
estimate
be adjusted AYIAK
to
estlmate
_.
This
.298 to .601.
which
still
turns
to border prices.
by SCF/CCF
for manufacturing factor.
SL_F (which is the reciprocal
Hence,
of
source of
share of compensation
we use the middle
Ay/_
coversion
on manufacturing
The upper
at an upper
limit
to
The main
Then entrepreneurial
a lower
_'his is done by mui_iplying
is the capital
equal
.5, as used in Manalaysay.
Furthermore,
standard
accounts.
to arrive
an estimate
As our final estimate,
,29.
rent and dividend
of labor share and hence procedure
A짜 _
for
the percentage
income.
income net of estimated
(See
follow Manalysay.
income
income
1973 to 1982 is taken.
an estimate
_ , We again
from the national
where output
From Medalla
SCF is the and CCF
(1979)_
of one plus the implicit
is around
of q using
,72 while
the ICOR method
the
tariff
the CCF is around .76. is calculated
to he
-
3.3.3.
The International look
We Borrowing
Borrowing at
Rate
the
US PrÂŁme
we want
these rates are prime
Likewise, change
Race
To reduce
and
rates
the flve-year
(1976-1980)
14.5 percent.
is computed
Interbank
of the international
q to be used in Table
of borrowing,
annual
This brings
London
(1978-1982)
are presented
of 14.12 percent,
0.38 percent.
the
the impact of random variation,
a long-run
The figures
hIEher rate
Rate
for the last five years
(Furthermore, pEojects).
-
(LIBOR) for an estimate
rate of borrowing. the average
38a
the average average
for future 3.
Since
we choose
the
US prlme
rate.
real exchange
(See Table 4.)
our estimate
is computed.
rate
ThSs is around
of q to around
-
39
-
Table 3 Interest Rates
YEAR
U.S.PRIME RATES
LIBOR
1969
9.62
8.77
1970
8.56
7.80
1971
5.96
5.43
1972
5.72
5.22
1973
IQ.15
9.26
1974
11.98
10.93
1975
7.15
6.52
1976 1977
6.79 6.80
5.59 6.11
1978
9.07
8.85
1979
12.60
12.07
1980
15.24'
14.11
1981
18.88
16.89
1982
14_81
13.20
14.12Z
13.02Z
Average annual interest rate 1978-1982
Sottrce:
International Currency Review 1983 Economic Pla-_ng and Development Authority
and Research Staff of the National Economic
-
Table
4.
40
Real Exchange
-
Rate
Changes:
1971-80
5 GDPIPi 4
GDP_I
R
GD
I"_
ZA
7O
Sl. 765
1. 250
3._41
4.069
71
93- 385
i. 075
3. 6275
3. 900
-4.151
72
i00
i. 000
3. 7354
3. 735
-4.23
73
117. 915
i. 170
3. 652
4.272
14- 38
74
154. 645
i. 4605
3.8558
5.631
31.82
75
167.37
1. 248
3,732
4.65-8
-17.27
76
182.93
1.077
4.0566
4 - 371
-
6.15
77
196.525
1.068
4 - 0898
4.370
-
O. 04
78
214.61
1.04
4.0687
4.231
- 3.16.
79
247.22
1.078
4.2123
4.542
7.35
80
285.62
1.0867
4 -B422
4. 718
3- B86
Average
from
1971
to 1980
-
Averaae
from
1976
to 1980 -
-3772 4.112
So_rces: INEDA
Rational
•2Central
Income Accounts
Bank "Thirty-Sacomd
(c_uter
Sta_iatlcal
print Bulletin
out). 1980.
3R is the weighted average of exchange rates of the currencies of the different countries with which the Philippimes does tradz. The weights are the ratios of the voluBe of trade between the Philippines and a particular country arid the total volume of trade be_t_een the Philippines and the world. Data source is the InternaCionai Financial Statistics of the International Menetary FuDd (IMF). 4GDpIPI is the implicit price index of GDP taken from the National Accounts Staff of the Natlonal Economic and Development Authority (NEDA). 5_ is the weighted averaae of the "_mport and price indices veighte_ by. shares of imports & exports in the Philippines tow trade. The price indices were taken from the Central Bank's Statistical Bulletln 1980 and rise trade shares from the ForeiEn Trade Statistics of the Philippines 1980. .... r--,
-
The second
approach
for SPS (based on what should be.)
-
sets,
Instead,
government
For example_
1.3, 1.5 and 2.
42
feels
we could
the premium
set the value
We can then derive
of q from the formula
an arbitrary
i, using
value
on saving
of SPS at
our estimate
for SPS:
A
i
-
q(l-s) SPS
+•
sq
A
Thus, we get the corresponding implied
Summary
i
i
.118
.091
1.82
1.5
,I06
.079
1.58
2
.087
.061
1.21
and Conclusions in pro_ect
study -- that we ought
depending
A convenient future
upon
the number
way to do this
discount
rate
costs
differences
income by population
the social
evaluation
to adjust
time for population
differ
h
1.3
An innovation
over
for i and i and
value for h.
SPS
3.4
set of values
is suggested and benefits
since
of people
(which avoids growth)
(as usually
in the
accruing
their values who share directl7
is to adjust defined
them.
discounting
the value
-- i.e.,
of fall in the value of the numeralre-consumption)
w_ll
of i,
the rate
by adding
-
to it n plus value
of
optimal
,i
i n_ to
rate
I. Saving program
Otherwise, of
the
to
as it should,
unity
we need
discount,
is optII_m
as a means
yields,
SPS equal
we have
To summarize,
be used
q and
program.
SPS and a soclal
-
Such a method
equal
saving
43
not
or that project saving.
an
estimates
equal
following
of increasing
under
to
a
for
q.
casesz
would not
select/on Then
A
i = q
Three
and
approaches
tabulated
SPS = I "
were
used
to
estimate
q.
_
....
•
Method Return
q
to manufacturing
14.04
ICOR method
13.82
International
Wechoose national
borrowing
the higher
borrowing
represent
a lower
Derive
to
•
estimate
and the
of 14.5 percent
as discussed
government
saving.
an independent
estimate
Than, i = i + n + i n, and
(l-s) SPS
14.5
from inter-
earlier,
thl8 should
bound,
increase
from gh.
rate
rate since,
is not optimum
selection A,
are
below.
......
II. Saving
Results
q
= i - sq
of i
wants
to
use project
-
Depending percent
while
44
o_ the value SPS ranges
-
of h, i ranges 1.18 to
from
2.47.
from 7.6 to 12.7 For h ffi1.5
A
(the mlddle
B.
value),
i = 10.2 percent
Set an arbitrary
premium
while
SPS = 1.59,
on SPS.
Thus A
i.
(l-s) q
+ sq.
SPS
For example, correspondingly
for SPS equal
equal
to 1.3, 1.5 and 2.0, i would
11.8 percent,
10.6 percent
and 8.7
percent. 4.
The Shadow Price of Labor 4.1
Determining
the
Shadow Price
The shadow price labor
of labor
for urban project
(SWR), is estimated
of Labor
(more speciflcally
employment,)
in Hedalla's
unskilled
or the shadow wage
study
(Bautlsta_
rate
et al._
as L
8 (l-s)(d-l) where _ is the
conversion
z is the marglnal
product
the ratio of labor force w is t_e wage
factor
for agricultural
of labor
in agriculture,
tO employment
rate in the project,
output,
in urban
L/N is areas,
s is the average
saving
1979)
-
ratio,
sW
45
-
is t|te.worker's saving d is the income
price of saving,
ratio,
SP$ is the shadow
distrlbutlonwelght
and
B 18 the ratio of OER to SER.• The first direct
term of the formula,
opportunity
employment,
For each
urban sector, misratlon
unemployment
(fairly
mlgra_ion
will
L/N workers
cost of hiring
rate, given
suggest
to restore
from rural
the
for project
job created
in the
that ruzal-urban
an equilibrium
the rural-urban
will migrate
, indicates
unskilled.labor
permanent)
theories
be induced
L
_z
wage
sector
differential.
thus foregoing
•L z oatput.
This is multiplied
prlces, l_[- The conversion appropriate
to agrlcultural
The L/N factor For non-urban This
sho_Id
be drawn
o, should
output
dlrect
areas.
then be
for urban projects.
z since
cost would labor• would
The implicit
is that all migration
that there is no migration
to border
foregone,
opportunity
be a regional
from surrounding
here, however,
factor
is applicable•only
projects= perhaps
by ¢ to convert
regionally
is rural
be z. probabll
assumption to urban
from rural
and
to rural.
lO-_We first derive S_ in border prices then multiply this by SER/OERtoconvert to domestic prices which is what is compared wlththemarket wage.
-
The last
(w-z) indicate
two terms
B (s-s w)
-
(w-z)
which
employment
factors,
except
surplus
product,
. Thus, in hiring consumption
are
B (l-s)
cost or the cost
from project
increased
-
of the formula,
(SPS-d)
the indirect
(resulting
46
(d-l)
of additional
of rural
labor).
labor, will be paid'by these other
cost
involved.
will be paid by an industrial
Surplus
a basic assumption
of labor, above,
than its marglnal
taxation,
inflation,
true if we were
goods.
that it is reasonable
to the worker else.
Van der Tak, is Simply
that
elsets
a government Otherwise,
expense
of
however,
as well
as
we count
as a cost and a benefit
of Little the whole rather
be not
we now think
incomes
of more
Moreover,
is also the general
through
will not
of the worker
for by the output
is not in this case offset This
cost
that did
project
that other
investment,
income
That might
so that the •extra consumption
have to be provided
goods at the
of someone
to assume
the indirect
income of the worker
or some other means.
considering
consumption
be affected,
in deriving
is that the increased
(w-z) would be at the expense
someone
is no
•,
However,
will
there
labor, however,
produc t.
produce
Primary
their marginal
resources,
wage higher
eonsumptlon
the
consumption benefit
by a disbeneflt assumption
and Mirrlees. increase
to
of Squire
and
The difference
in worker
consumption
the
by
than this less
maou_t
-
which
the cons_tion The result
4?
-
of others
is a much
simpler
L SWR -- _z _ + B (w-z) This is SWR inborder
is reduced.
(l-sw)
prices.
To convert
to compare
the market
multiply
this by I/B (i:e., $ER/OER). for incorporating
of the SWR is to encourage more
sa_ing
and more
considezations
are valid
not just wage
income.
way in which when
evaluating
carried
out,
labor),
resources
product. labor
project
to a11 incoues,
we devised
an alternative
can be incorporated
being proposed
full employment
will
be used
_nskilled
than an avera_
to
relatively
But if _hese
apply
cost of labor
which
Qnd evaluated
(except
somewhere
labor, will
Thus, any project
of increased want
Accordingly,
assuming
surplus
that produce
a project.
If a particular
except
else.
be paid
hires
Everything,
by its marginal
proportionately
project,l--I/would involve
consumption
is
taken
to
a higher
more cost
and it is this gap that we really
be
the
alternative
iS not
for unskilled
measure.
11/This
prices
_rate, we simply
to the poor.
they should
the indirect
wage
to domestic
SPS and d into the calculation
projects
Income
for the SWR
(SPS-,d)
in order
The reason
with
expression
project.
-
48
-
m,:
Hirln 8 propqrtionately it would since
affect
the proportlonof
the worker's
others.
income
Two,
goln8
more or less labor has two effects.
savln8
it would
The more unskilled
labor would
s is the proportion
is the proportion we should
adjust
multiplying
of income the income
accordingly
sj
the proportion
pj.
lower is sj but the higher project,
saved by the proJea_,
rate, sw, is assumed
affect
to the poor,
income
to be
on s and p are opposite,
be employed
by the project,
is pj.
Suppose
of income that would
8o to the poor. project
1 + (sPs-1)
Estimating
and
Then
J by
sj
, and
i + (ses-1)
I
+
4.2.
be saved
by
(2) pjd + (lopj)
+ (d-l)pj
i + (d-l) additional
cost and benefit of
is thus incorporated
Hence,
the
that for an average
that would
of a par tlcular
._(sPs) + (I-_)
consumption
than
The effects
(sPs) + (1-sj)
of the
sj,
of the project's
.......
The effect
lower
One,
to estimate
increased
in sj and pj
SWR, we need only
the SWR when all incomes
(glven s and p). L to estdmate Uz _.
are adjusted
for saving
end
income distribution. From the above discussion, to (in
border "
prices) L
SWR ffiaz _ .
the SWR estimate
has been reduced
-
For
coconut
tariff
oll,
copra
is negative
and
desiccated
of wage
(4th Quarter
computed.
coconut,
the
implicit
of the three
close
rates,
and corn domlnate,
palay
to
-.04).
took u = 1.0.
L The factor _ is derived
more work
-
(an average
Since in 'the weighting we slmply
50
from the Labor
1980 and 1981).
as 50 percent
unemployed,
Dlvldln 8 the labor
emplryment,
Counting
L/N is computed.
Force
Survey
the _mployed
total
wishing
employment
is
force by thls estimate Thls
of total
Is 1.26 for 1980 and 1.30
for 1981. Estimates following
of the SWR for 1980 and 1981 are given
table,
together
raw data from Medallats
with
earlier
an estimate study.
for 1977
Results
in the
uslng the
are tabulated
below.
Year
SWR in border prices
SWR in domestic prices
...........
4.3.
Estimating
_
1i
i[
1977
9.28
11.14
1980
13 .33
16 •00
•54
1981
15.81
18.97
.60
the additional
consumption
of increased
consumption
in the S_.
of SPS and d, the lncome
.66
cost of hlrln8
We still trled to see what happens
estimates
SWR W
labor
if we include
This
requires
distribution
the cost
consistent
parameter.
-
in
the
Technical
51
Notes
-
of
the
ZPPP project,
a method
estlmatin&
the Income
distribution
parameter
The latter
is defined
as the ratio
of the marginal
of consumption hired
of a particular
workers),to
average
level.
by _O(c)
= c
class
the marginal Assuming
of
(d) is shown. utility
(in our case the newly
utility
of consumption
a social welfare
f_nction
at the
i_plied
-h
where
_ is
,
average
consumption,
h is the elasticity MU is marginal Assuming we have
of marginal
utility
annual
of c from c
and
we get _1,216
is consume_,
(his former wage
O
in the project).
as F12.16
If we multiply
and again by 0.4 to account dependents,
consumption
of consumption.
of the worker
to c n (his new wage
data give these
respectively.
utility
all of the income
in agriculture)
is .workers'
function.
the range of values
preliminary
c
and
_31.82
Our
per day,
these by 250 days per year
for the consumption
and P3,182,
of his
respectively,
for
consumption.
Then we must
ask what we mean by average
In the IPPP project "average"
rather
50 percent but we will
we selected
than mean
higher.
We
nevertheless
median
consumption,
are not sure follow
consumption째
consumption which
as our
is about
that this is right,
the same procedure
here.
-
52
-
We have data for overall per capita consumption, which was P4,152 in 198] (the year of our other data).
To estimate
•median consumption, we multiply this by the ratio of median to mean income from the 1971 household survey.
This involves
two heroic assumptions -- first, that the skewness in the two distributions is about the same and, second, thaw the shape of the distribution did not change much over a decade.
We hope
we can do better, but we will proceed now on that basis. ast_ted
Our
value of _ is, than, P2,727.
Integratlng our expression for d over the whole range of values
from c
0
to c
n
. _f.
(cn-c o) d
dC
•
0
•-h
= C
C
-h
dc
c
'= c __,o
_
h=l
cn
h _ 1,12/
Zf. we put h = 2 (the upper limit for Squire and van der Tak (S-T) and the lower limit for the IPPP project), we get d m 1.92.
S-T recommend setting h arbltraTily at unity in
the absence of any information that would thrQw light on the questlon.
That would yield d = 1.31.
d = 1.56.
12/for h = 1, (en-Co)d
_, c Incn
c
o
In between, h = 1.5 gSves
-
If
we
do not
use project values
assume
evaluation
an
-
optimal
saving
to increase
for SPS which
also depends
1.18 for h equal to 1.0, q _.145,
._3
program
on h.
We have
and confirmed
by a procedure
The principal
reason
wage rate;
1.0 used
slmilar
seems to be
risen far less than overall is true also
(though
in the I짜2P project
that farm wage
above.
rates have
consumption.
to a lesser degree)
are the implications
(This uses
to that used
per Capita
1.59 _nd
All of the values
The same
for the urban minimum
so this is a second contributing
What
2.47,
1.5, 2.0, respectively.
than the
to
saving, we need correspon_g
s = .20, g = .05, and n ffi.025.)
for d are much higher
and want
cause.
for the estimation
of the SWR?
Recall
that
The results
for three h
SPS
SWE
.076
2.47
1.5
1.56
.10Z
1.59
19.56
1.92
.127
1.18
4.42
of h.
h at the higher
high value
i
for h are:
1.31
Obviously,
plausible
d
guesses
1.0
2.0
the value
different
social
the SWR is very Moreover,
sensitive
rate of discount
to be consistent
7.6 p_rcent, rate.
with
about
If we _et a
(i) and SPS, we get a very
for d that puts the SWRvery
SWR above the mlnlmumwege
to the assumption
we seem to face a dilemma.
end of the range
we get an i of only
41.78
low.
an extremely
At the other high
end;
SPS and an
-
We would the
range,
of income
of
that
a very high
to poor
estlmaC1ng
d,
d for any
the
we
medlan two
for
could
method
h.
First,
throughout
that
high values
for
1.5,
gives
is concerned째
be
closer
If this isnot too high.
should
intensive of about
rate
of
the most
1,5.
the
estlmete
Income_
income,
to
the
so
mean. too
low.
rather
that
the
Thus
for
Finally,
full time
worklng
true, we have set their
So we c---or blame
plauslble
the method
to make
against.
This means
result
It is always
would
we should that
for h, the middle
i _f about
by some argument
10 percent
investment,
reason,
for d,
be dlecrlmlnsted
discount
low
of the consumpt$on
of
are
because
in our method
median
may be
of
a transfer
downward
taken
that
farm workers
The corresponding
Justified
But
that
the skewness
than
a pure rate of time d_scount be
bias
biases
consumption
on the low elde, however.
have tO
h.
end
very highly
It same- that of the range of values value,
upper
d downward-for
we have
less
the
the year.
the
an upward
probably
should
and consumption
for the
value
Second,
"average"
assumed
we have
income
probably
our
upper
adjust
our
consumption
reasons
at
d (we are valuing
than mean as the average. is
be
Zf there were
given
distribution
should
workers), we get an implausibly
farm
however,
-
i
with
for the SWRo
_n fact, of
agree
consistent
thls ylelds
value
all
54
so far as the SWR I0 percent
open of course
It higher째
note
as tO why future
too
favorable
the
corresponding
the initial
to add
This would
If we are concerned be
seem
to
generations that a capitalSPS
Invest:sent cost in a
project ments
should are at
expense it
the
represent
intenoÂŁty.
of other If
e etron8
th_s
10 percent
if
were
us,
that
we Judge
investments,
deterrent
What _4Kht worry
an i of
-
50 percent
expense
of consumption.
would
that
be raised
55
new
rather
than a_ the
done in project to excessive
hoveverj
would be accepted
is
invest-
evaluation, capital
the possibility
and the
SPS isnored.
t
4,4.
Conclusion. All
oÂŁ the
incorporate
saving
completely section
above
(i.e., 4.2
and income all
above.
difficuÂŁties
incomes,
are
avoided,
distribution not
however,
if
considerattono
just
wage incomes)
Then the appropriate
social
more as
rate
we
in
of discount,
A
i,-is is
to q, L to az _,
equal equal
chose
to ipore
entirely
the marsinal Note
saving
in project
that
product this
or
the more complete
manner described
represents
innovation
a real
recommend that
it
would
and income
evaluation,
be carefully
of capital, be true
distribution
end the Sk_ either
parameters
if we incorporate in section
in project considered.
if we
4.2.
evaluation
them in The latter end We
-
TABLE 5:
56
,-
WEI_TED AVERAGEFARM_'AGES, BY CROP A[_D I_ COMBINE;DREGIO_S: 1979-!980
PHIL
i
ll
1879
10.87
10. °_0
1!. 17
1980
10.73
10.26
1981
12.51
1!.19
1979
10,07
?. 91
t0.02
1980
10.14
9. _2
1981
11 . 19
1979
3,11
IV
'
!3.85
I0.52
'_12.04
I_0.04 ""
10.61
,15.45
!1.37
!0.91
10.09
:,0.4g
t2._
9.27
10.20
12.35
12.00
_. 99
11. 26
!0.52
I0.00
:0.89
9.8_-
_.0,63
1980
10,54
-
12.27
9.43
9.64
i981
12• 23
-
15.25
11 •C2
10.61
COm9
•OOCOh'Ir_
-
TABLE 6:
57
-
AVEP.,._E ',qT,_EIt&I:ES, BY COI_Slh'EDR,EGZONS: • 1979-i980
FlIZL
I
II
_I
.......
IV v,
v'
1.979
10.61
10.71
llil. 99
10.51
10.50
lgSO
10.55
10.13
12.1.5
9.80
10.22
198I
12.16
12,22
15.09
!1.10
lfJ.96
-
Append:J.x 1:.
Year
58
-
The l_tverse of the Iucremenl:L1. _pica_4.-.oucpuc _c_n O:coe,)
_gl)P (AY)
_net jgCuec
1973
4,633.33
7,354.67
.62998
1974
2,851.67
8, 383. O0
.34017
1975
3,908.33
13,935.67
.357.:19
1976
4,993.33
14,107.00
.35396
1977
4,16:5.00
16;532.33
.25193
1978
3, 98 3. O0
16,134 • 33
.24656
1979
4,661.67
17,607.33
.26476
1980
4,218,67
19,655, O0
.21464
1981
2,8 34• O0
20.315 • 67
• 1395
1982
2,491.66
20,190.67
• 12341
Appendix =2: The
59 -
5h_re of Labor aud Capis:al
• .
(_)
" '(I-Q)
.
73
z3,6ss.7_
.39s_8
_.7_
t2,:9o3.17
41,ssT,s3
.7o532
74
32,721.80
.40326
7.5,7_0
18,134.07
57,64.5.93
.71042
75
37,187,48
.i._0433
86,122
20,812'$7
bS,309.&3
.71009
7_
_.t92.;,;
.4034t
;0:,,:_4
_,272.:53'
7s,071.47
.Tl_ee
77
50,911.38
'40712
117,905
25,993.80
90_9|1.20
.72698
78
57.933.76
.40397
134,168
31,290.37
102,877.63
.71736
79
_,35o.os
.3_o3z
t._,29_
4o,792.e3
_z7,4_.:jz
.67oge
'39058
193.761
48'124.30
145,636.70
.67987
.39139
223,297
$4, $5"7.13
168,739.87
.M495
'80
.83,666,00
•-81
_re_tie
96,419; 64
_:_
(_ (_e_lr_e
1973-82 • sJuu_e-of
• 39878 .60122
,70174
Reference8 Bacha,
K. and L. Taylor, Review o£ Current LXXXV (_y 197D.
"¥orei_ Theor£es;
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