Political Economy of Governance and Inclusive Growth in the Philippines

Ronald U. Mendoza, Jose Enrique Corpus and Gabrielle Ann S. Mendoza

World Economics, 2026, vol. 27, issue 3, 223-248

Abstract: Political and economic institutions in the Philippines reinforce an inequality trap. Family-owned conglomerates nationally and political dynasties locally concentrate power, enabling rent-seeking that distorts policy, restricts market participation, and drives uneven development. Philippine conglomerates have contributed significantly to GDP, infrastructure, and major sectors, yet their investments remain concentrated in rent-rich, non-tradable areas like real estate and construction. Unlike successful East Asian models, they have not shifted into competitive, export-oriented, and innovation-driven activities, limiting productivity and inclusive growth. Locally, political dynasties often blend public office with business interests, promoting rent-seeking and anti-competitive policies linked to higher poverty and weaker public services. Outcomes differ: growth-oriented dynasties invest in human capital, infrastructure, and jobs with positive spillovers, while resource-focused ones stay extractive. Emerging shifts signal potential progress. Conglomerates are diversifying into technology, renewables, and tradables; startups are expanding with rising innovation; and some local leaders are advancing development reforms. These point to possible development bargains aligning elite incentives with broader growth, innovation, and competition. Escaping the trap requires complementary reforms to boost competition in markets and politicsthrough economic liberalisation, stronger competition policy, electoral and party reforms, and curbs on dynastic dominance. Success depends on aligning elite incentives with long-term investments in institutions, human capital, and productive sectors.

Date: 2026
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