Technical progress in agriculture, income distribution and economic policy : the Philippines, 1950-80
Date
1989
Authors
Coxhead, Ian A
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Abstract
Successive Philippine governments since world war II have pursued a development
strategy predicated upon industrial growth. Through such policy instruments as exchange
rate overvaluation, tariffs on imports of consumer goods, and export taxes on agriculture,
capital has been directed into industry - and especially the manufacturing sector - both
from abroad and from out of agriculture. The growth of the protected industrial sector
has been achieved at the cost of periodic trade balance crises, and a persistent
maldistribution of income between rural households (which are largely dependent on
agriculture) and their urban counterparts.
Within the agricultural sector, public investment, subsidies, credit programs,
research and extension have been focused on food crop producers in the most favourable
(irrigated) agricultural areas, especially those in the Manila hinterland regions of Central
Luzon and Southern Tagalog. Agricultural producers in less well developed regions have
been doubly taxed: once by the economy-wide bias against agriculture, and a second time
relative to other agricultural producers by the "irrigation bias" of public spending on
agricultural development. A faster rate of technical progress in the areas favoured with
better quality land endowments and public policy support has further disadvantaged
producers in other agricultural areas by driving down real product prices and raising the
real prices of mobile factors. Empirical partial equilibrium analyses of the distributional
effects of new technologies have failed to capture these indirect costs of technological
innovation.
In this thesis a simple Johansen-style general equilibrium model is developed for the
analysis of changes in prices and technology in stylised well-irrigated and poorlyirrigated
agricultural environments. The model’s parameters of agricultural factor
demand, supply response and technical change are estimated from Philippine data.
Hypothetical and empirically measured technical change shocks are applied to the model.
In this way the ceteris paribus effects of technical progress are assessed for their impact
on wages, sectoral employment and factor intensity, and the functional and household
distributions of income.
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