Eco assignment on: Philippines economy

Eco assignment on: Philippines economy

The Philippine economy has been recorded as one of the fastest growing developing nation amongst the South East Asian nations. In the year 2007, GDP rate grew up to 7.3%. This rate of GDP has been regarded as one of the fastest as well as highest growing rate till now. Economic growth in case of this economy i.e. Philippines has been quite rapid as mentioned above, just like any other developing nation all across the globe.Based upon the modern growth theory, the human capital refers to as one of the most important contributor of economic growth. With reference to the human capital model of economic growth, the numerous studies regarding the various countries would lead to an overall enhanced output of the Philippines economy (Brocaglia, 2007). This model would help in order to produce inconsistent as well as various controversial results. This model would also help in order to form an interrelationship between education as well as the labor productivity & earnings (Son, 2011).

It must be noted that, more educated individuals would have a better employment as compared to those who are less educated. This shows that more educated people would generate high rate of employment which would lead to a rise in the overall earnings & product more levels of output (Son, 2011). Hence, it would provide a strong justification for the government as well as the private households to invest in education which would have an expectation that high benefits could be reaped over a specified amount of time (Brocaglia, 2007). Here, education would be referred to as an investment which would enable the individuals in order to be well equipped with in depth knowledge as well as skills to improve the overall productivity, efficiency & effectiveness which would help to increase the levels of earnings (Brocaglia, 2007).

With this context, Philippines educational system has been characterized by high attendance rates which imply high levels of interest in education. This as a result, has led to an increase in the overall years which the labor spends in a school (Gerochi, 2002). This has also led to an increase in the overall knowledge which has in turn increased the performance in the educational sector. In contrast to this, the poor performance in regards to growth of Philippines is becoming more puzzling with reference to the educational sector (Brocaglia, 2007).

With this context, a question arises i.e. “how much importance has been given to the education sector of Philippines which has led to a consistent rise in the economy”. Various micro & macro factors would be used in order to deal with such a complex issue (Brocaglia, 2007).The main objective of this paper would be to discuss human capital model in regards to economic growth in Philippines. This would also be considered as one of the binding forces which might lead to a consistent rise in the economic growth of the country (Brocaglia, 2007). Various cross country comparisons could be done in order to see whether the human capital model plays an important role to depict high levels of economic growth. With the various graphs mentioned below in the paper, it could be seen that Philippines have had a consistent rise in the overall economic growth of the country (Son, 2011).

On the basis of the Investment Climate Survey conducted on more than 70 firms in the years 2005-2006 depicts that, human skills & education play as one of the major obstacles in order to take any decision in Philippines (Son, 2011). An in depth research should be carried between education & the earnings earned by labor. This would help in order to analysis how important is education & the way it has been used in order to take certain critical decisions as well (Gerochi, 2002). This would clear all the misconceptions that, education not only plays an important role in case of employment whereas even in case of individual earnings as well as productivity of the same.In case of Philippines, various attempts have been made in order to see the level of contribution made by education in the growth of the economy. Philippines have been regarded as one of the economies which have led to sluggish growth in the major economies of East Asia (Son, 2011). The real rate of growth has been declined by 3.8% whereas on the other hand, the labor force has been expanded by an approximate rate i.e. 2.8%. The table below shows that, the GDP the standard indicator of growth has been increased by 1%. This figure was quite less as compared to the GDP of the other developing nations & far below amongst the 7 major economies in East Asia having GDP as 2.4%, 4.4% respectively (Gerochi, 2002)

Note: 7 economies of East Asia referred to in the table above would be Thailand, Singapore, China, Indonesia, Thai, Republic of Korea, and Malaysia (Gerochi, 2002).

The output produced by an average Philippines worker has increased by an approximate figure of 50% in the past 40 years. The figure for the 7 East Asian economies with respect to the same has been on rise for the past many years from now. The table depicts the various reasons which might have led to a gap between the economic growths of human capital (Son, 2011). The major reason depicted in the table has been with regards to educational attainment. In case of Philippines, the average age of providing the education to a child was at an age of 15 years having an average of 4.4 in the year 1960 which has been turned to 8 in the year 2000. In contrast to this, the average of the 7 East Asian economies has increased from 3.4 to 7.8 (Son, 2011).

According to the survey conducted by Investment Climate Survey i.e. ICS, more than 700 economies confirmed that, education & skill of the worker does not a major source of barrier in case of a good investment in Philippines (Gerochi, 2002). The figure1 below shows, the various macro factors such as corruptions, instability, security, uncertainty, regulatory, etc. which are mainly attached to the human capital model (Gerochi, 2002).    Growth in both the aspects physical as well as total factor productivity (TFP) in this economy was much better as compared to the rest of the 7 economies of East Asia (Son, 2011). The average TFP in Philippines has been estimated to be negative i.e. -0.2% whereas on the other hand, the TFP for 7 East Asian economies has been estimated to be 1.4% pa. Such type of findings has led to conduct various types of surveys in respect to the growth indicators of the Philippine economy (Son, 2011).

The growth analysis has been divided into four major periods i.e. 1961-65, 1965-76, 1976-81 & 1981-91. In the major periods mentioned above, the growth amongst the domestic product in the year 1985 has been based upon the various estimates. It has been mentioned in the survey that, raw labor accounts for more output as compared to the capital invested (Gerochi, 2002). With the improvements in the quality of labor, the growth output has been explained in terms of both the quantity as well as the quality of the desired labor force. The education range has been increased from 11.8% in the year 1961-65 to 59.2% in the year 1981-91. The labor quantity has been ranging from 18.2% in the year 1961-65 to 110.4% in the year 1981-91 (Gerochi, 2002).

The contribution of labor quality with respect to the total factor productivity in the years 1967 to 2000 were divided into seven ranges. The workers were termed into skilled & unskilled labors. The skilled workers are referred to those people who have at least a high school degree (Son, 2011). On the basis of the various study, it has been found that the labor quality has been declining from 2.11% in the year 1967-72 to 0.16% in the year 1991-93 which would rise slowly in the year 0.52% in the year 1998-2000 (Son, 2011).

                                                            (Source: Brocaglia, 2007)

The graph above shows the consumer as well as the producer surplus in case of Philippines. It has been seen that, the willingness of the consumers to pay for a particular good or a service has been increased with the rise in the level of GDP.

Same is the case in respect to producer’s surplus. It has been stated that, the willingness of the producers in order to supply the good or a particular service with respect to Philippines. As discussed above that, the economic growth in the Philippine economy has been at its peak therefore, the change in the demand & supply due the change in price has also led to a change in the total level of producer’s surplus.

The various methods have been used in order to estimate the contribution amongst the education sector with regards to the economic growth in case of Philippine economy. The various studies provide that the education sector would be directly linked with the growth or the productivity of the output so yielded. The following section would provide various evidence in respect to the positive or negative relationship amongst education as well as the earning & the productivity in context to Philippine economy (Gerochi, 2002).

The major objective of this model is to see whether the productivity or the output produced by the labor is one of the most important as well as crucial factors in order to explain the productivity & earnings. Or the other main objective would be to explore the labor productivity which would continue to grow the real income of an individual (Gerochi, 2002).

The households decide upon the education & the participation of the labor force. The primary motivation in order to attend the school would be better in order to earn hefty amount of income as well as attain various non labor market benefits for better nutrition, health, leisure activities, etc (Son, 2011). Higher the earning higher would be compensation for an increased productivity with the help of education. This would refer to as the human capital model of economic growth (Gerochi, 2002).

The table below would describe the per capita household employment with respects to the gender as well as education factor.

                                                (Source: Brocaglia, 2007)

The table above would show the educational levels with respect to the households, education as well as gender factor attached to it. The figures depicted in the table would be expressed in terms of per capita income (Son, 2011). The per capita in case of the educational level is recorded to be 38.4% in the year 2003 (Brocaglia, 2007). This states that, on an average approximately 38.4% households were employed in the year 2003. This could also be taken as 2 members out of every 5 members in a household is well employed & is earning good level of income (Gerochi, 2002). The per capita employment has been increased from the year 1997 to 2003. According to ADB, LFP has been growing at an average of 0.9% whereas the rate of unemployment has jumped to 10% pa even at the time of crisis (Brocaglia, 2007).

In the context of Philippines, the higher educated labor force would take away majority of the jobs available in the economy. This would help in order to grow the economy at a high pace. This scenario would help in order to increase the labor productivity & act as a contributing factor in order to neglect negative growth of the economy (Bosworth & Collins, 2003).There has been various evidences which shows that, education levels have been on rise in case of the labor force, graduates from various colleges which have attained high levels of productivity in terms of knowledge with respect to the low skilled workers such as taxi drivers, buses, tricycles, etc (Gerochi, 2002). Most of the times, it is seen that large amount of people have been employed but they mismatch their profiles as per the educational sector. In order to enhance the various strategies for long run, the government should formulate various policies & procedures so as to address this issue (Son, 2011).

Hence, it could be concluded that Human Capital Model of economic growth has been quite an effective tool which would help to enhance the overall growth of the Philippine economy (Asian Development Outlook, 2007). As per the various tables mentioned above, the rate of return of education has acted as an investment which would involve the individuals in order to reap the various levels of gains in the year to come (Son, 2011).Human capital model or theory suggests that, the individuals should invest in education as well as train them in order to act more productive in case of the labor market. This would help in order to have higher earnings in the years to come (Bosworth & Collins, 2003). This states that, in case of a fully competitive market, the wages would reflect the productivity of the workers & hence, they would gain in productivity which would in turn result in high levels of worker (Bosworth & Collins, 2003). It must be kept in mind that, the potential employers should consist of superior productivity which might always increase the productivity. Many evidences state that, human capital model or theory has been one of the best model for the Philippines economy (Asian Development Outlook, 2007).

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