Stimulating Global Competitiveness: An Economic Analysis of the Middle-Income Trap in The Philippines

Abstract

The Philippines has been a lower-middle-income country for two decades since its entry into the bracket in 1996. Despite enjoying a steady growth rate, the Philippine economy is yet to break through the upper-middle-income bracket and is described to be stuck in the so-called Middle-Income Trap. The middle-income trap is a situation in which countries fail to adapt to the changes within their domestic market, and as a consequence, lose their global competitiveness. According to literature, active innovation and specialization are key factors in boosting global competitiveness and preventing the middle-income trap. In this paper, the researchers explored the determinants for exports and reviewed macroeconomic trends in the Philippines. Multiple linear regression analysis and descriptive statistics were employed to examine the effects of education, research and development, business activities, and foreign direct investments on exports. The regression model indicated a positive relationship among exports and the variables education and research and development, while it was found that foreign direct investments demonstrated a negative relationship between exports. The researchers put forward the enrichment of competition by promoting active research and development of goods, the specialization of the labor force, and the deregulation of government policies to future studies and policy formation to alleviate the country from the middle-income trap.