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Structural change cannot do without international free trade. This entails lower tariff rates
and decreasing the barriers in order to make transactions more mobile. An effective structural
change is seen in the presence of comparative advantage. Comparative advantage is present
when a country can produce a product at a lower cost as compared to other countries. However,
resource immobilities also exist. Resource immobilities are present when there’s a hindrance in
the shift of production from one sector to another. An example of this according to the article is
the existence of minimum wage and permanent employment, where it is difficult not to displace
people coming from one industry to another, even in the midst of a comparative disadvantage.
Moreover, there are local industries that struggle to take on structural change due to the large
costs it will incur.
In Japan, there are a lot of laws that suspend structural change. In 1983, they
implemented “Batas sa Pagpapahusay Istruktural,” where industries are given 5 years of
transition. This was achieved by a merger, increasing capital, and researching. Because of this,
the Philippines failed to benefit from structural progress. Other than bettering Japan’s nation, it
was reminded by the author that it should remember the role it plays as a leading economy and
must fulfill its promise in leading the Philippines into becoming an industrialized economy.
References:
Halton, C. (2020, January 29). Structural Adjustment Definition. Retrieved
from https://www.investopedia.com/terms/s/structural-adjustment.asp