Welcome! Jesus Felipe's Site

I am Principal Economist, Head of the Strategic Research Unit, and Director of the Central Asia Regional Economic Cooperation (CAREC) Institute, in the Central and West Asia Department of the Asian Development Bank (ADB), Manila, Philippines. Previously, I was Economist, Senior Economist and Principal Economist in the Macroeconomics and Finance Research Division of the Economics and Research Department. I joined ADB in 1996. My intellectual and research interests spread across areas such as East Asian development; productivity measurement and technological progress; determinants of growth; the functional distribution of income; business cycles; evolution of profit rates; and time series econometrics.

I am also a Research Associate at the Centre for Applied Macroeconomic Analysis (CAMA), Australian National University, College of Business and Economics; at the Centre of Full Employment and Equity (CofFEE), University of Newcastle (Australia); the Cambridge Centre for Economic & Public Policy, University of Cambridge; and the Center for Full Employment and Price Stability (CFEPS), University of Missouri-Kansas City. I am a member of the Editorial Boards of Metroeconomica and of Journal of Employment and Public Policy.

Before joining ADB I taught (Statistics, Econometrics, Development, The Economics of Technological Progress) at the Hong Kong University of Science and Technology during 1995-1996; and I taught (Statistics, International Economics, The Political Economy of Development) at the Georgia Institute of Technology (Atlanta, USA) during 1999-2002 (I was on leave from the Asian Development Bank).

I received my undergraduate degree in Economics from the Universidad Autonoma de Madrid, 1979-1984 (Madrid, Spain). I studied Economics during the political transition of Spain to democracy. It was a very interesting and convoluted period, which coincided with the second oil crisis, the rise of unemployment and inflation, years of stagnation, and the negotiations between Spain and the European Community. It was also the period of the debt crises (the Latin American “lost decade”); and the period of Reagan and Thatcher. PCs arrived the year I graduated, so I typed my papers the old style, and submitted a few handwritten. It was also the end of the world economic order established after WWII with the collapse of the Bretton Woods System. I received an education of which I am very proud, and I am grateful to all my Professors during my University years, especially Antonio Pulido, who taught me econometrics; and Paloma Sánchez, who taught me how to do research, and asked me to read "Las Venas Abiertas de America Latina" ("Open Veins of Latin America") by Eduardo Galeano.

I undertook my graduate studies at the International University of Japan (IUJ), 1989-1991 and at the University of Pennsylvania, 1991-1995. From the latter I received my Ph.D. in Regional Science in 1995. I am also highly indebted to all my Professors at IUJ and to the Japanese Ministry of Education for providing me with the opportunity to study in Japan through a very generous scholarship (Monbusho). At U. Penn. I received an outstanding education. I am more than thankful and indebted for life to Gerry Adams, my mentor and advisor. Gerry, together with Howard Pack, Masa Fujita, Ron Miller, Bobby Mariano, and Hashem Pesaran (who visited U. Penn while I was there), among others, taught me Economics. At U. Penn I had the chance to meet Professor Lawrence R. Klein, Nobel Prize winner in Economics (1980). The International Centre for the Study of East Asian Development (ICSEAD) (Kitakyushu, Japan) provided me with a generous scholarship that allowed me to study in the US. Overall, my life as a student was a very rewarding period and an invaluable experience.

Being utterly dissatisfied with how mainstream neoclassical macroeconomics addresses questions of growth, development and distribution, I began years ago exploring other models and schools of thought. First, I became familiar with the efforts that Anwar Shaikh at the New School University has been making for years to revitalizing the works of the classical economists (e.g., Adam Smith, David Ricardo, Thomas Malthus, Karl Marx). The classical economists of the 18th and early 19th century were mostly concerned with the analysis and implications of long-run growth, its causes and consequences. Anwar has been a constant source of inspiration for years.

Second, I became familiar with the work of Franklin M. Fisher at MIT on aggregation in production functions. Frank is the “grandfather” of the aggregation problem. He knows it all! His work has profoundly influenced me. Our Metroeconomica (2003) survey on the topic was a rewarding exercise in discovering some lies my teachers had told me. The aggregate production function is arguably one of the pillars of neoclassical macroeconomics. However, this construct does not have a sound theoretical basis. Did you know that aggregate production functions with neoclassical properties (i.e., a well-behaved production function) do not exist (even as approximations!) because the conditions under which microeconomic production functions can be successfully aggregated to yield an aggregate production function are so stringent that actual economies cannot satisfy them? Much of standard macroeconomics stands on shaky foundations.

The other important strand of the literature that has crucial implications for the notion of an aggregate production function is the Cambridge-Cambridge debates (see Harcourt 1972 and Cohen and Harcourt 2003 for detailed discussions).

These fundamental results led me to questions such as the following: what do economists obtain (if it is not a production function because it does not exist) when they estimate a regression of aggregate output on aggregate labor and aggregate capital?; do the policy implications of the neoclassical (both old and endogenous) growth models have any relevance?; how much do we really know about why some countries are richer than others?; what implications does this have for important debates such as that of the sources of growth in East Asia?; or for the discussions about the empirical relevance of the endogenous growth models (e.g., the existence of increasing returns, externalities and market imperfections)?

These issues led me to develop with John S.L. McCombie at the University of Cambridge a research project entitled “The Empirical Foundations of the Aggregate Production Function”. John and I began corresponding in 1994 while I was finishing my dissertation, and since then, our partnership has been most fruitful and has led to a number of publications. I am thankful to John for all he has taught me. We are working on a book that we hope will see the light soon. The essence of the argument we put forward, extensively discussed in our published papers, is as follows: all aggregate production functions do is to approximate the income accounting identity according to which output equals the sum of the wage bill plus total profits. Hence, a fitted aggregate production function tells us very little about the underlying economic processes. Incidentally, this line of work goes back to Anwar Shaik's 1974 and 1980 papers on the 'HUMBUG' production function. Growth accounting exercises suffer from similar problems and the "Solow residual" (total factor productivity growth) is not a measure of technological progress the way it is understood in the neoclassical growth model. All in all, we argue that this model consists of a series of unrefutable propositions (thus, useless), and hence it is inadequate to explain the reality. To study growth we propose to conduct microeconomic work analyzing firms (the source of wealth-creation in capitalist economies); case studies and historical analyses at the country level; and to think of growth completely outside the neoclassical corset. Frank Fisher and I concluded our survey on aggregation as follows:

“Macroeconomists should pause before continuing to do applied work with no sound foundation and dedicate some time to studying other approaches to value, distribution, employment, growth, technical progress etc., in order to understand which questions can legitimately be posed to the empirical aggregate data” (Felipe and Fisher 2003, Metroeconomica).

I believe all this work has profound implications at both the theoretical and empirical levels for a correct understanding of one of the most important questions that economists have been trying to answer since the days of Adam Smith: why do some countries grow and develop while others fail to do it?

"I can imagine a world fifty years from now in which the differences in economic performance among the rich countries are about the same as they are now. I cannot imagine another fifty years going by with as many people remaining poor. Either the poor countries must get considerably richer or the rich countries will have to organize the world in an apartheid-like way. Nobody wants a global apartheid. Therefore, the most important problem facing us today is economic growth for the poor countries" And: "I would much rather have my children, grandchildren, and great-grandchildren have to deal with the problem global warming than with the problem of a huge economic difference between rich and poor countries. The consequences of global economic disparities are much more troubling than the consequences of global warming" (William W. Lewis 2004, pp.251-252 & 260)

Traveling around the world, and in particular living in the Philippines (a fascinating country), has led me to believe that capitalism, as an economic, political and social system, is a very powerful force. While capitalism is an advanced stage with respect to feudalism, where many developing countries are still stuck, and brings a lot of desirable things, it does not prevent poverty or social misery; quite the opposite, it reinforces it, though this is not to say that capitalism is responsible for the existence of underdeveloped and poor countries. What I believe is that a full industrialization of world production cannot be accomplished through the accumulation of private capital. The concentration of wealth based on private property divides the world into capital-rich and capital-poor regions, just as it polarizes each particular nation into capitalists and wage workers. In other words, capitalism has found it more profitable to restrict industrial development to its own part of the world. Growth in capitalism is knife-edge unstable (à la Harrod). It is about survival of the fittest; about undercutting competitors in price and innovation, about ruthless competition (not the textbook competition); it is also about distributional fights between social classes; about recurrent crises; about uneven development across nations; about concentration and power. It is in this context that globalization should be understood.

I believe that mainstream (neoclassical) growth models (both in the Solow tradition and the new endogenous versions) are ill-suited to study these questions. Models with classical roots, where accumulation, productive investment and the reinvestment of profits are the main driving forces behind economic growth, can help a great deal understand these questions. Central to many of these models is the issue of the functional distribution of income, that is, how value added is divided between labor and capital. In the neoclassical models this is determined by the so-called technological properties of the economy, embedded in the characteristics of the aggregate production function. This is summarized in the result that each factor is rewarded according to its marginal productivity, an idea that originated with John Bates Clark. Often this is referred to as a "fair" distribution of income. However, the idea that the system is basically fair and that each social class receives income in direct proportion to the value of its marginal productivity is very dubious and questionable, not to mention that it is irrefutable (again, useless) empirically.

The 1995 Nobel Prize winner, Professor Robert Lucas, wrote in 1988:

"I do not see how one can look at figures like this without seeing them as representing possibilities. Is there some action a government of India could take that would lead to the Indian economy to grow like Indonesia's or Egypt's? If so, what exactly? If not, what is it about the "nature of India" that makes it so? The consequences for human welfare involved in questions like these are simply staggering: Once one starts to think about them, it is hard to think about anything else."

Indeed, one cannot stop thinking, for example, about why the Philippines, the star of East Asia in the early 1960s, is today a textbook case of "what-not-to-do"; or about why tiny Singapore, a place without much hope at the time it split from Malaysia also in the early 1960s, today has achieved OECD standards. Or think, for example, why the East Asian countries (e.g., South Korea, Taiwan) have been successful at developing and manufacturing products under their own brand names in such areas as automobiles, computers, electronics, and household appliances. Why hasn't this happened in other countries? Read Kenneth Rogoff's "A Development Nightmare."

Place to live? Asia

Food? Asian and Spanish