BODY

(National Income and Productivity)

The national income towards labor and capital affects the measured rate of productivity
growth. Businesses will be able to have more profit as they can charge higher markups on their
goods and services simply because they have more market power. Compared to the pricing in a
perfectly competitive market, their pricing of the cost of producing goods and services is higher.
And because markups are relatively high, the goods and services are produced less efficiently,
but with increased profits for the owners of capital (Vollrath, 2015).

(Increase in Capital)
Capital may consist of equipment, structures like residential investments, change in
inventory and other capital goods. Capital goods comprise expenditures such as breeding stocks
and orchard development. Short-term assets like cars and computers must provide all of their
services before they depreciate in just a few years. On the other hand, office buildings provide
their services for many more years. This shows that in a year, a worth of a short-term asset gives
relatively more services than a worth of an office building. Capital services among assets have
differences. Capital can increase not only because investment increases it, but also if the
investment gives relatively more services (NSCB, 2004).

(TFP over the years)

From The Total Factor Productivity Growth as estimated by Cororaton (2002),
productivity decreased continuously from years 1994 to 1998. This was the time when the
Philippine economy was slowly recovering from political uncertainties against the Aquino

government. In addition to this, El Nino and the Asian financial crisis in 1997 also affected
making the economy even difficult to recover. But from 1999 onwards, productivity recovered.

The table presents the Total Factor Productivity, Labor and Capital Productivity.
For the four decades, the Philippine Total Factor Productivity growth rate has been
declining. Shown in the table the calculated figures for Total Factor Productivity and Labor and
Capital Productivity, that the rates are positive at 1.89% and 2.0% in the period 2001-2010.
There are key factors that determines the productivity. First, the determinants of total factor
productivity should be estimated. Secondly, the determinants of labor productivity must be
identified.
Found from Llanto (2012), these are determined by educational attainment as the
schooling year that represents the human capital investment, research and development as a
percentage of expenditure in GDP, trade openness as the share of export in GDP, and government
consumption in GDP (Llanto, 2012).

(Labor Quality on TFP)

The table presents the effects of labor quality on Total Factor Productivity.
Observed from the results that in spite of the increase in skilled labor to total
employment, its contribution to Total Factor Productivity has declined. This is seen from period
1967-72 with 2.11 percentage points then decreased to 0.16 in period 1991-93. Although it
started to recover in the next periods, it doesnt make constant improvement. The economic
growth is driven by improvements in the productivity, which includes producing more goods and
services from factors of production. This decline may result from many factors. First, employed
skilled labor may have not actually acquired the actual skill required for the development of
labor. But also we must consider labor quality factors such as education. Second, the quality of
education that could have produced the necessary skills for workers to improve productivity may
have declined through time. Such as use of technology such as creating better manuals and
instructions for making raw materials into goods and services. Even though the Philippines has
produced one the highest number of college graduates, it also has produced one of the lowest
number of graduates that specializes in science and technology, and engineering. Third, the
productivity of workers that attained higher education and efficiency of education itself, has
deteriorated. Fourth, the constant increasing number of Filipinos working abroad may have
resulted in brain drain, which resulted to loss in productivity in the local economy. Some reasons

includes education as not reflecting productivity improvement that results Filipinos looking for
jobs elsewhere and the efficiency of the educational system (Cororaton, 2002).

CONCLUSION
Stated as well that capital in constant has been the largest contributor to growth.

REFERENCES
Cororaton, C. B. (2002). Total Factor Productivity in the Philippines. Discussion Paper Series
No. 2002-01 (Revised). Philippine Institute for Development Studies, Manila.

Llanto, G. M. (2012). Philippine Productivity Dynamics in the Last Five Decades and
Determinants of Total Factor Productivity. Discussion Paper Series No. 2012-11. Philippine
Institute for Development Studies, Manila.

Virola, R., Domingo, E., Talento, R., Cas, A. G. (2004). Institutionalizing Productivity
Measures in the Philippine Statistical System. NSCB National Statistical Coordination Board,
Manila.

Vollrath, D. (2015, September 26). Labors Share, Profits, and the Productivity Slowdown.
Available at https://growthecon.wordpress.com/2015/09/26