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How might China-US industrial policies affect the Philippines?: a quantitative exercise

Author

Listed:
  • Ma. Joy V. Abrenica

    (University of the Philippines)

  • Anthony G. Sabarillo

    (University of the Philippines)

Abstract

The recent industrial policy competition between the two economic hegemons, US and China, prompts developing countries to consider if and how they should respond. Using a multicountry, multisector Ricardian trade model with sectoral scale economies, we simulate different scenarios when a developing country like the Philippines takes a passive and active stance. We find welfare gains for the Philippines when it responds by implementing its own industrial policy, and welfare losses from inaction. Timing, however, matters. If the Philippines moved earlier before China and US engaged in industrial policy competition, the welfare gains are larger. Although the magnitude of gains is small, the results suggest an increased demand for industrial policy when the guardrails of the international trading system are lost due to the defiance of its benefactors.

Suggested Citation

  • Ma. Joy V. Abrenica & Anthony G. Sabarillo, 2024. "How might China-US industrial policies affect the Philippines?: a quantitative exercise," Philippine Review of Economics, University of the Philippines School of Economics and Philippine Economic Society, vol. 61(2), pages 171-198, December.
    • Handle: RePEc:phs:prejrn:v:61:y:2024:i:2:p:171-198
    as

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    File URL: https://pre.econ.upd.edu.ph/index.php/pre/article/view/1065/1007
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Industrial policy; scale economies; new quantitative trade models;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation

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