Why Regions Fail: The Case of The Philippines

Why Regions Fail: The Case of the Philippines
Angara Center Lecture Series, University of the Philippines

Pablo Querubn James Robinson
NYU and Harvard
August 20, 2014
Querubn Robinson (NYU and Harvard) Why Regions Fail August 20, 2014 1 / 20
Why Nations Fail
Poor economic outcomes are the result of extractive economic
institutions that fail to create incentives and opportunities for the
vast mass of people.
Extractive economic institutions are a consequence of extractive
political institutions which have two dimensions
1
Narrow distribution of political power (lack of pluralism).
2
Weak and ineective state (lack of political centralization).
Why Regions Fail
Though the focus in our book is very much on national outcomes
there is a lot of discussion of regional variation
US South versus the rest of the US:
South historically had more extractive economic institutions
Slavery, far less public good provision, with the obvious results: 50% of
national GDP per-capita in 1860, 40% in 1940, higher inequality, less
manufacturing industry, urbanization, less innovative even in the
economic activities in which it specialized.
A consequence of more extractive political institutions
White males got the vote far later in the South in 19th century, after
Civil War the solid south absence of political competition, black
disenfranchisement until the 1960s.
Breakdown of extractive political and economic institutions in the
South coincided with it converging to the US mean.
Spatial Distribution of Extractive and Inclusive
The US South example makes the point that even within a country
with basically inclusive institutions there can be extractive institutions
as well and they may be regionally concentrated creating
spatial/regional inequality.
In this case where the extractive institutions are all bad things go
together creating underdevelopment.
Is the Philippines like this?
Regional Development Patterns in the Philippines
Large regional variation in levels of income per-capita and poverty.
But one basic fact is that Mindanao is substantially poorer than the
rest of the country. The poverty rate is signicantly lower in Luzon
than in Mindanao.
The poverty rate goes from 70% in Lanao del Sur (in Mindanao) to
4% in Metro Manilla.
Income per-capita in 2006 dollars ranges from US$942 Tawi-Tawi (in
Mindanao) to US$5,101.
Poverty and low income clustered in Mindanao, lack of poverty and
high income in Luzon.
LuZCn MlnuAnAC vlSA?AS
overLy lncldence, 2009 23.38 44.90 37.83
lncome per CaplLa (uS$), 2006 2430.82 1710.37 1964.30
uynasLy Perflndahl, 1988-2010 0.46 0.33 0.47
Share 8lggesL uynasLy, 1988-2010 0.36 0.62 0.37
ConfllcL Lplsodes, 2006 1.64 9.40 2.44
Share Wlld opulaLlon, 1903 0.18 0.36 0.02
lracLlon Musllm opulaLlon, 2000 0.02 0.23 0.01
lracLlon of Mayors who are "uaLus" 0.00 0.02 0.00
Access Lo LlecLrlclLy 0.63 0.41 0.49
Access Lo lped WaLer 0.39 0.36 0.39
Carbage CollecLlon by 1ruck 0.13 0.08 0.08
LlemenLary School LnrollmenL 0.84 0.73 0.79
8oad uenslLy 0.38 0.20 0.26
Cood Covernance lndex, 2008 187.00 148.47 147.90
Cverall Land Clnl, 2002 0.70 0.64 0.69
1able 1
Summary SLaLlsLlcs
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Poverty Ranking
LUZON VISAYAS
MINDANAO
Poverty Ranking (2012)
Figure 1
1
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Income per Capita Ranking
LUZON VISAYAS
MINDANAO
Income per Capita Ranking (in USD), 2006
Figure 2
What Explains Variation in Poverty?
Argument 1: There is Something Special about Mindanao (or Luzon)
We present evidence that poverty is signicantly negatively correlated
with
1
with the presence of political dynasties at the municipal level
(coecient estimates for congress and governor similar but noisier and
insignicant).
2
with the presence of violent incidents by non-state armed actors (NPA
and MILF) (state absence - lack of monopoly of violence)
3
with the historical incidence of wild tribes from the 1903 US Census
(which we also interpret as colonial state absence) and fraction of
population muslim in 2000.
But adding Mindanao and Luzon dummies reduces the size of the
coecient of (1) by half, switches the sign of (2) and makes (3)
insignicant.
Thus many bad things go together in Mindanao (and good things go
together in Luzon) and the sum of their impacts on poverty is
quantitatively large.
What Explains Variation in Poverty?
Argument 2: The Puzzling Role of Land Inequality
We present evidence that poverty is signicantly negatively correlated
with land inequality. The quantitative eect is very large.
We show that higher land inequality is associated with several
important channels, higher literacy and educational attainment, and
higher provision of public goods measured by access to potable water,
road intensity.
This is true inside and outside Mindanao and land inequality is not
signicantly dierent on average in Mindanao.
This within-country ndings mirrors something we found in joint work
with Daron Acemoglu and Mara Angelica Bautista 5 years ago for
Colombia (Economic and Political Inequality in Development: The
Case of Cundinamarca, Colombia) (and has been since discovered by
others - e.g. Claudio Ferraz and Fred Finan in Brazil).
Very dierent from the US case.
Whats Going on with Land Inequality?
We propose three interpretations of this partially building on our
earlier work
1
Economic and political elites are distinct. High land inequality indicates
the presence of strong economic elites who can place de facto
constraints on the activities of political elites which is good for public
good provision (hypothesis, corruption should be lower in places with
high land inequality).
2
The relationship is picking up an confounding variable, state presence.
Big landed estates are only viable where the state can enforce property
rights and build infrastructure etc. So extractive elements (coercive
labor relations in sugarcane) are dominated by the positive eects of
state presence (being neglected is worse than being exploited?).
3
In such a patrimonial society, economic elites are heavily involved in
service provision.
In the Philippines (like Cundinamarca) land inequality and political
concentration are negatively correlated.
Correlates of Poverty
Reduced Form Evidence
Political dynasties measured between 1988 and 2010 by
1
A Herndahl index of concentration of seats at dierent levels of
government in the hands of a single family (e.g. 8 elections for mayor
in this period, if all mayors are from the same family H = 1, if all
mayors were from a dierent family H = 0.125).
2
Fraction of seats held by the family with the largest number of seats
(also ranges from 0.125 to 1).
Conict - number of violent episodes coded from newspaper reports
between November 2005 and October 2006.
Wild tribes in 1903 proportion of the total population classied as
Wild (only at the provincial level). US made a distinction between
civilized and barbarian with civilized being basically those
Christianized, wild was everyone else.
(1) (2) (3) (4) (5) (6)
Dynasty Herfindahl, 1988-2010 9.586 4.294 4.454
(1.877) (1.545) (1.105)
Share Biggest Dynasty, 1988-2010 10.193 4.829 4.821
(1.950) (1.603) (1.138)
Mindanao Dummy 6.863 6.871
(0.884) (0.883)
Luzon Dummy -14.201 -14.182
(0.791) (0.791)
Province Fixed Effects NO NO NO NO YES YES
Observations 1,611 1,611 1,611 1,611 1,611 1,611
R-squared 0.016 0.017 0.347 0.348 0.724 0.725
Dependent Variable is Poverty Incidence, 2009
Table 2
Poverty Incidence and Political Dynasties (Municipal-Level Regressions)
(1) (2) (3)
Conflict Episodes, 2006 0.391 -0.275 -0.309
(0.063) (0.061) (0.072)
Mindanao Dummy 9.273
(1.007)
Luzon Dummy -13.756
(0.838)
Province Fixed Effects NO NO YES
Observations 1,427 1,427 1,427
R-squared 0.026 0.334 0.715
Poverty Incidence and Conflict (Municipal-Level Regressions)
Table 3
(1) (2) (3) (4) (5)
Share Wild Population, 1903 9.117 4.807
(3.848) (4.436)
Fraction of Population Muslim, 2000 16.046 -0.732 23.068
(1.991) (1.881) (3.219)
Mindanao Dummy 1.894 6.965
(4.445) (0.989)
Luzon Dummy -9.050 -14.366
(3.440) (0.794)
Observations 77 77 1,560 1,560 1,560
R-squared 0.070 0.223 0.040 0.340 0.737
Dependent Variable is Poverty
Incidence, 2012
Dependent Variable is Poverty
Incidence, 2009
Table 4
Poverty Incidence, Indigenous Population and Fraction Muslim (Provincial-Level Regressions)
(1) (2)
Fraction of Population Muslim, 2000 0.068 0.091
(0.010) (0.023)
Province Fixed Effects NO YES
Observations 413 413
R-squared 0.105 0.411
Table 5
Share of Datu Mayors and Percent Population Muslim (Municipal-Level Regressions)
Dependent Variable is Share Datu Mayors, 1988-2010
Only for Mindanao
(1) (2) (3)
Dynasty Herfindahl, 1988-2010 4.477 3.236 3.383
(2.050) (1.710) (1.198)
Conflict Episodes, 2006 0.241 -0.285 -0.322
(0.067) (0.061) (0.070)
Fraction of Population Muslim, 2000 12.485 -0.238 22.339
(2.178) (1.957) (3.436)
Luzon Dummy -13.922
(0.837)
(1.073)
Province Fixed Effects NO NO YES
Observations 1,406 1,406 1,406
R-squared 0.052 0.342 0.732
Table 6
Reduced Form Determinants of Poverty (Municipal-Level Regressions)
Correlates of Poverty
Potential Channels
We now present evidence through which these variables may be
inuencing poverty. We use public goods outcomes from the 2000
Philippine Census.
Fraction of households that use electricity as a source of lighting.
Fraction of households with faucet piped water.
Fraction of households with garbage collected by a truck.
Primary school enrollment (fraction of children aged between 6 and
12 attending school).
Electricity Piped Water Garb. Truck School Atten.
Good
Governance
Index
(1) (2) (3) (4) (5)
Dynasty Herfindahl, 1988-2010 -0.077 -0.174 -0.052 -0.048 -25.358
(0.031) (0.031) (0.021) (0.011) (11.606)
Observations 1,580 1,580 1,580 1,580 1,464
R-squared 0.004 0.019 0.004 0.011 0.003
Dynasty Herfindahl, 1988-2010 -0.030 -0.167 -0.037 -0.030 -17.205
(0.028) (0.031) (0.021) (0.010) (11.438)
Mindanao Dummy -0.086 -0.034 -0.009 -0.043 1.345
(0.016) (0.017) (0.012) (0.006) (6.390)
Luzon Dummy 0.167 -0.004 0.078 0.048 38.139
(0.014) (0.015) (0.010) (0.005) (5.636)
Observations 1,580 1,580 1,580 1,580 1,464
R-squared 0.194 0.022 0.061 0.177 0.046
Table 7
Political Dynasties and Public Goods Provision (Municipal-Level Regressions)
Dependent Variable is:
Panel A: Simple Bivariate Regression
Panel B: With Mindanao, Luzon Fixed Effects
Good
Governance
Index
(1) (2) (3) (4) (5)
Conflict Episodes, 2006 -0.007 -0.004 -0.001 -0.003 -1.550
(0.001) (0.001) (0.001) (0.000) (0.355)
Observations 1,414 1,414 1,414 1,414 1,309
R-squared 0.039 0.011 0.002 0.057 0.014
Conflict Episodes, 2006 0.000 -0.003 0.002 -0.001 -0.959
(0.001) (0.001) (0.001) (0.000) (0.407)
Mindanao Dummy -0.094 -0.016 -0.026 -0.040 7.009
(0.017) (0.019) (0.013) (0.006) (6.913)
Luzon Dummy 0.188 0.020 0.095 0.051 35.581
(0.014) (0.016) (0.011) (0.005) (5.691)
Observations 1,414 1,414 1,414 1,414 1,309
R-squared 0.233 0.014 0.084 0.206 0.047
Table 8
Conflict and Public Goods Provision (Municipal-Level Regressions)
Good
Governance
Index
(1) (2) (3) (4) (5)
Fraction of Population Muslim, 2000 -0.360 -0.317 -0.133 -0.173 -58.705
(0.031) (0.032) (0.022) (0.011) (11.578)
Observations 1,550 1,550 1,550 1,550 1,435
R-squared 0.079 0.060 0.023 0.136 0.018
Fraction of Population Muslim, 2000 -0.207 -0.365 -0.093 -0.125 -44.099
(0.033) (0.036) (0.024) (0.012) (13.096)
Mindanao Dummy -0.040 0.043 0.010 -0.015 10.119
(0.017) (0.019) (0.013) (0.006) (7.125)
Luzon Dummy 0.171 -0.004 0.079 0.050 38.489
(0.014) (0.015) (0.010) (0.005) (5.636)
Observations 1,550 1,550 1,550 1,550 1,435
R-squared 0.213 0.065 0.067 0.227 0.053
Table 9
Fraction Muslim and Public Goods Provision (Municipal-Level Regressions)
Land Inequality and Poverty
Reduced Form Evidence
Now we present the reduced form results with land inequality and
poverty.
Land inequality measured from 2002 Agricultural Census at the
provincial level imputing fraction of landless households.
This is not a Mindanao versus Luzon phenomenon (same relationship
is signicant using just Luzon or just Mindanao data).
Land Inequality and Poverty
Potential Channels
Same as before from the 2002 Census plus:
Road density (Department of Public Works and Highways).
Functional illiteracy (Human Development Report 2006).
Note the connection between land inequality and public good
provision - consistent with both the above stories: economic elites
constrain politicians, land inequality correlated with state presence.
0
2
0
4
0
6
0
8
0
.4 .5 .6 .7 .8 .9
Land Gini
LUZON VISAYAS
MINDANAO
Poverty Incidence (2012) and Land Inequality
Figure 3
(1) (2) (3) (4) (5)
Overall Land Gini, 2002 -48.714 -35.493 -28.995 -6.310 -60.588
(14.596) (13.771) (19.619) (38.207) (22.017)
(3.745)
Luzon Dummy -8.032
(3.400)
Sample All Provinces All Provinces Luzon Visayas Mindanao
Observations 78 78 38 16 24
R-squared 0.128 0.295 0.057 0.002 0.256
Table 10
Poverty Incidence and Land Inequality (Provincial-Level Regressions)
Road Density Electricity Piped Water Garb. Truck School Atten. Func. Illiteracy
(1) (2) (3) (4) (5) (6)
Overall Land Gini, 2002 0.595 0.158 0.402 0.592 0.137 -20.448
(0.242) (0.191) (0.182) (0.163) (0.068) (10.194)
Observations 72 72 78 78 78 77
R-squared 0.079 0.166 0.060 0.148 0.051 0.051
Overall Land Gini, 2002 0.399 0.158 0.287 0.575 0.055 -12.181
(0.239) (0.191) (0.183) (0.166) (0.059) (9.628)
Luzon Dummy 0.119 0.069 0.053 0.088 0.040 -6.422
(0.059) (0.047) (0.045) (0.041) (0.015) (2.377)
Mindanao Dummy -0.038 -0.065 -0.052 0.055 -0.036 1.889
(0.065) (0.052) (0.050) (0.045) (0.016) (2.639)
Observations 72 72 78 78 78 77
R-squared 0.198 0.166 0.138 0.198 0.347 0.230
Table 11
Land Inequality and Public Goods Provision (Provincial-Level Regressions)
Putting the Results Together: The Ampatuans in
Maguindanao
On November 23, 2009 a convoy of female relatives of Esmail Toto
Mangudadatu and journalists was intercepted by around 100 armed
men in the municipality of Datu Saudi-Ampatuan.
The relatives were on their way to the capital of Maguindanao, Shari
Agauk, to le papers for Mangudadatus candidacy to contest the
election for the governorship of Maguindanao in 2010.
21 women and 36 men were killed.
That the massacre happened in the municipality of Datu
Saudi-Ampatuan on the way to Shari Aguak was signicant. Both
names reect the rise to power and political dominance in the
province of the Ampatuan family.
The family claims to be descended from a preacher Shari Aguak who
brought Islam to the area, probably in the 14th century. The capital
of Maguindanao was renamed in his honor in 2000.
History of the Ampatuans
Andal Ampatuan Sr started the dynasty. He started as vice-mayor
then mayor of Shari Aguak (then Maganoy) during the dictatorship
of Ferdinand Marcos, was back as mayor in 1988. After 10 years in
this job he stood down and was elected governor of Maguindanao in
2001. He was re-elected in 2004 and then again in 2007 when he was
unopposed.
As Toto Mangudadatu discovered, this was his preferred type of
election contest and he anticipated something similar when his son
Andal Jr planned to replace him as governor in 2010 (since Andal Sr
was term limited).
In 1995, Maguindanao had eighteen municipalities, by 2009 it had 36,
most of them run by Andal Srs sons, nephews, in-laws and other
members of his extended family. The municipality of Datu Unsay was
created in 2003. Its rst mayor, still in power at the time of the
massacre, was Andal Ampatuan Jr, (nickname is Datu Unsay). The
municipality of Datu Saudi-Ampatuan, also created in 2003, was
named after his eldest son.
The Politics of Persistent Poverty
How is the absence of the state and the rule by the Ampatuans an
equilibrium?
Andal Srs consolidation of power was greatly helped by his ability to
forge links with national politicians such as Gloria Macapagal Arroyo,
elected President of the country in 2004.
Arroyo received statistically improbable numbers in Maguindanao. In
at least two towns in the province, Arroyo won all the votes cast in
the election, while her hugely popular opponent, ex lm star Fernando
Poe Jr. got zero votes. Andal Sr. had also promised a 12-0 sweep for
Arroyos senatorial lineup, and he delivered.
This is similar to what drives regional inequality in other parts of the
world, the Hayes-Tilden agreement of 1877 where the North agreed to
stop trying to reform the US South (ending Reconstruction) in
exchange for votes in the electoral college. Santa Fe de Ralito in
Colombia (Acemoglu, Robinson and Santos, 2013). How does a
northern Italian politician like Berlosconi manage to win big in Sicily?
Why in Maguindanao?
All the structural factors we have identied point towards high
poverty in Maguindanao.
During the colonial period the state was absent (98% of the people
were wild in 1903). Since independence the state has also been weak
and clearly lacks a monopoly of violence.
Political dynasties emerged.
Very low levels of land inequality (Gini of 0.68) so no landed elites to
oppose the rise of the Ampatuans (interestingly the more functional
parts of Mindanao with far better governance and low politics, such
as Davao City in the province of Davao del Sur (Land Gini 0.84) or
General Santos in South Cotabato (Land Gini 0.83) far higher levels
of land inequality.
Is Mindanao Historically Condemned to Poverty?
Note that Mindanao is closer to the equator than Luzon. Is it
condemned by its geography to poverty and under-development?
In fact in the early modern period, Mindanao, even Maguindanao
where the Ampatuans now hold sway was the most developed part of
the Philippines, producing spices like pepper for export and integrated
into the mercantile trade routes of Southeast Asia.
In fact, as we discuss in Why Nations Fail, the relative development
of the Philippines was reversed (A Reversal of Fortune) by the Dutch
East India Company which systematically attacked the Sultanates of
Maguindanao, Sulu and elsewhere.
Reality Check: Leyte and Samar
Obviously hard to compare Mindanao and Luzon, many omitted
variables and hard to distinguish between the direct and indirect
eects of factors that lead to extractive political institutions.
An interesting natural experiment is Leyte and Samar. Two islands,
right next to each other, connected by a bridge since 1973.
No ethnic, religious or signicant geographical dierences Yet huge
gap in terms of poverty and income per-capita.
Why?
Leyte and Samar: Some Ideas
The developmental dierences between Leyte and Samar are very
consistent with our emphasis on extractive political institutions.
Long history of relative absence of the state in Samar (wild tribes)
which continues today (road density, irrigation, presence of NPA and
non-state armed actors)
Relative governance failure (Leyte has ourishing participatory
budgeting, Samar had one attempt - Santa Rita - which collapsed)
and large dierences in accountability (Leyte has a radio station and
independent media, Samar has neither).
Suggests that the dierences in political institutions between two
similar places may cause large dierences in poverty (and not the
other way round: modernization?)
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Conclusions: Back to Why Regions Fail
In this talk we presented some simple facts about the correlates of
poverty in the Phillippines.
There are two big stories
1
Bad things go together in Mindanao, Good things go together in
Luzon, accounting for the large dierences in poverty rates (and
income per-capita) between them.
2
Land Inequality is strongly associated with lower levels of poverty.
Both of these ndings can be related to the underlying nexus of
extractive and inclusive institutions in the Philippines. For example,
Mindanao suers from a long-running absence of the state which leads
to violence, the undersupply of public goods, low educational
attainment, high poverty and low incomes. This is a key part of
extractive political institutions
This spills over into political dynasties, which adversely inuences the
other margin of extractive political institutions - a pluralistic
distribution of power - which further increases poverty.

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