Services Liberalization and Wage Inequality in the Philippines

Abstract

This paper examines the impact on employment and wages of liberalization in selected services subsectors (banking, distribution, and telecommunications) in the Philippines from 1991 to 2004. On the assumption that value-added effects arise from service liberalization that subsequently increase productivity in other sectors and influence changes in average wages across industries, results indicate that liberalization may have potentially harmed more vulnerable populations that are less educated, and created greater opportunities for employment in good jobs for higher-skilled males relative to females. This suggests the need for policies to support education, as the Philippine economic structure shifts away from primary and secondary sector production, which typically requires a higher skilled and more educated labor force. Greater disaggregation of the data along the lines of gender, education, occupation, and employment status highlights the usefulness of careful policy analysis in designing programs to redress distributional imbalances that accompany liberalization and structural transformation.

Keywords: services liberalization, wage inequality, liberalization policies, full-time salaried workers, services liberalization index, trade restrictiveness index, real wage, employment

JEL Classification: F16, E24, L8