Ateneo de Naga University

Ateneo Avenue, Naga City

Employment: An Analysis of Harrod - Domar and

Patterns of Development in Cabusao, Camarines Sur

Ababa, Michelle

Aliorde, Jenelyn

Falcon, Danica Bea

Lasam , Jashlaine Joy

Macayan, Ma. Keila

Marpuri, Joyce

Rentoy, Krizzia Mae

Reyes, Kim

Rodriguez, Mary Philline

January, 2019
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TABLE OF CONTENTS

Title Page ......................................................................................................................................... i

Table of Contents ............................................................................................................................ ii

Chapter I Introduction ..............................................................................................................1

Background of the Study .........................................................................................1

Statement of the Problem .........................................................................................2

Scope and Delimitation ............................................................................................3

Chapter II Review of Related Literatures and Study ................................................................6

Related Literature.....................................................................................................6

Related Studies.........................................................................................................8

Chapter III Research Methodology .........................................................................................13

Research Design.....................................................................................................13

Subject of the Study ...............................................................................................13

Research Instrument...............................................................................................13

Data Gathering Procedure ......................................................................................14

Chapter IV Findings and Discussions .......................................................................................17

Chapter V Recommendations ..................................................................................................22

Bibliography ..................................................................................................................................26
 Chapter 1

Introduction

Background of the Study

Employment is defined as persons of working age who were engaged in any activity to

produce goods or provide services for pay or profit, whether at work during the reference period

or not at work due to temporary absence from a job, or to working-time arrangement. The

agriculture sector consists of activities in agriculture, hunting, forestry and fishing. Philippines is

primarily an agricultural country and most citizens still live in rural areas and support themselves

through agriculture. The country's agriculture sector is made up of 4 sub-sectors: farming,

fisheries, livestock, and forestry which together employ 39.8 percent of the labor force and

contribute 20 percent of GDP. In addition, the statistic shows the distribution of employment in

the Philippines by economic sector from 2007 to 2017. In 2017, 25.96 percent of the employees in

the Philippines were active in the agricultural sector, 17.73 percent in industry and 56.31 percent

in the services sector.

On the economy of Camarines Sur, it is mostly agriculture-based. Out of the 35 towns, 29

towns are mainly agricultural, producing rice, corn, feed meal, freshwater fish, livestock, coconut,

sugar, abacá, and water-lily. Cabusao has agricultural as a base of the economy because of its large

granary near its border in Libmanan. It also has fishing as a base of the economy because all of the

fisheries products from Calabanga are brought here to be passed in Libmanan. Yet,

Underemployment is prevalent in Cabusao, Camarines Sur. The sources of job are mainly fishing

and farming, so the residents are mostly self-employed. In addition, industrial work for the

residents is not available, because of that, some residents migrate to nearby cities just to find a
 2

decent job that will give them another source of income. The lack of job opportunities in Cabusao

prove that people is on poverty lane because of underemployment and unemployment

With this timely societal dilemma, the researchers intends to assess how lack of employment

contributes to poverty Cabusao, Camarines Sur.

Statement of the Problem

This study sought to formulate a theory that can address the problem of lack of employment

at Sitio Sabang, Cabusao, Camarines Sur.

Specifically, through the answers of the following questions:

1. What are the factors that cause lack of employment at Sitio Sabang, Pandan, Cabusao,

Camarines Sur?

2. What are the effects of lack of employment applying the Harrod-Domar and Patterns of

Development in Sitio Sabang, Cabusao, Camarines Sur?

3. What are the possible solutions or alternatives to minimize the rate of lack of employment?

Chapter 2

Review of Related Literature

This chapter presents related literature and studies relevant in understanding how the

discussed theories of development may be used to answer the unemployment problems in Cabusao,

Camarines Sur.
Related Literature

Halperin (2018), used the term Development to refer to the national economic growth

emerged in the United States beginning in the 1940s and in association with a key American

foreign policy concern which answers the question how to shape the future of the newly

independent states in ways that would ensure that they would not be drawn into the communist

Soviet bloc. Motivated by this concern, the United States enlisted its social scientists to study and

devise ways of promoting capitalist economic development and political stability in what was

termed the developing world. There are different conceptions of development and, consequently,

disparate approaches to the subject. Moreover, development is usually seen as crucially determined

by structures of governance; governance is interpreted through and shaped by the goal of

development. Most development theory equates development with national economic growth and

sees the state as its primary agent; consequently, one of its central concerns is to understand and

explain the role of the state in development and the nature of government-market relations.

Knowing that these explanations relate development outcomes to the extent and form of the state’s

role in development. Hence, there is a close relationship between development theory and practice.

Moreover, he also added that the development theory has changed over time with changes

in ideology and the international environment, and as it changes, conceptions of development and

governance and its relation also changes. Development involves innumerable variables, including

economic, social, political, gender, cultural, religious, and environmental factors. But though

development theory integrates concepts and perspectives from a range of disciplines, it was highly

influenced by economic thought from the start. Early theoretical models of development equated

development with economic growth and industrialization, and theorists saw countries that had not
yet achieved these as being at an earlier or lower stage of development relative to Europe and

North America.

Meanwhile, Copestake (1999) defined the term ‘economic development which refers to

long-term changes in systems of production and distribution of goods and services affecting human

welfare. In contrast to ‘economic growth’ it involves changes in the form as well as the scale of

economic activity. In common usage, development is usually assumed to be by definition a good

thing. Economies development is almost always fickle in its effects – some benefit at others’

expense, long-term gain may require short-term pain (and vice versa), and one person’s indicator

of progress may be another’s indicator of regress.

Pettinger (1998) reiterated the Theories of Development, different models of economic

growth gives alternative causes of economic growth. First is the Classical model developed by

Adam Smith in Wealth of Nations (1776), Smith argued there are several factors which increased

the economic growth: Role of markets in determining supply and demand and the productivity of

labor. Smith argued income per capita was determined by the state of the skill, dexterity, and

judgment with which labor is applied in any nation which concludes the role of trade in enabling

greater specialization. It is greatly shown in increasing returns to scale.

In addition, Ricardo and Malthus developed the classical model. This model assumed

technological change was constant and increasing inputs could lead to diminishing returns.

Malthus added that the population would grow faster the world’s capacity to feed itself thus it

under-predicted the capacity of technological improvements to increase food yields.

Furthermore, Pettinger (1998) explained the Neo-Classical model of Solow/Swan. The

neo-classical theory of economic growth suggests that increasing capital or labor leads to
diminishing returns. Therefore, increasing capital has only a temporary and limited impact on

increasing the economic growth. As capital increases, the economy maintains its steady-state rate

of economic growth. He added that in order to increase the rate of economic growth in the

Solow/Swan model we need an increase in proportion of GDP this is limited as a higher proportion

of investment leads to diminishing returns and convergence on the steady-state of growth and

Technological progress which increases productivity of capital/labor. These suggest that poor

countries who invest more should see their economic growth converge with richer countries.

On the other hand, there were criticisms of neo-classical also called the Exogenous model,

first is it doesn’t explain why countries have different levels of investment as % of GDP. Next,

some developing countries don’t attract higher levels of investment because of structural problems

such as corruption, lack of infrastructure. And lastly, it doesn’t explain how to improve rates of

technological progress.

Another theory of development is the Harrod Domar model – Savings Ratio and Investment

a type of neo-classical model. It states growth rate depends on a function of the savings rate. Some

growth theories place a large emphasis on increasing domestic savings. Savings provide the

necessary funds to finance investment. It is this investment which creates further growth. This has

been an important factor behind the economic growth in Asia. However, it depends on how

efficient the investment is. If savings is too high it leads to lower growth because people cannot

afford to consume.

And lastly, Pettinger added the Unified growth theory developed by Oded Galor, unified

growth theory tries to combine many different elements of economic growth wherein the economic

stagnation that characterized most of human history until the eighteenth century first industrial
revolution and beginning of economic growth The role of human capital formation in economic

growth in explaining divergence in economic growth across countries.

Chapter 3

Theoretical and Conceptual Framework

Harrod-Domar Growth Model

The survey that was conducted from Sitio Sabang, Pandan, Cabusao that deals with how

incapable and capable people. These were the basis for analysis, provided that there will be a

theory suggestion so that it could possibly help people manage their lifestyle on the said place.

People were asked basic questions explaining what was their present socio-economic conditions

and behaviors were. It will be discussed further the possible treatment of such happening, if there

are problems that they face currently.

Upon looking at the data, there are vast number of children living in a compound and in

connection there are lots of unemployed citizen. Simply stated, people cannot survive such

situation without experiencing hunger and malnutrition. In terms of characteristics of their

ownership and asset, it will be concluded that there are household that lives in a small amount of

space in their houses. There are things owned of them that are less effective than the other things

possible to own. Lastly, things that they spent with, are things that are more than that of they can

earn each month. Aside from their mostly self-employed salary, they must acquire money from

the government but unfortunately, not all of them were given that privileged to become

beneficiaries. In summary, people in Cabusao were not capable enough to live in harmony, there

are basic things they could not obtain themselves. Furthermore, it would be a great help for them

to apply treatments and these will be achieved from the theories that will be presented.
 Unfortunately, not all theories are applicable enough to answer such problem. Economic

theory for instance like “The Neocolonial Dependence Model” would be inappropriate as it

stresses mostly in political matters and it does not discuss further how and what should be the

possible solution in order to solve cases like the poverty, but rather it focuses only on the negative

sense and counterexamples. Moreover, the need to find a more accurate theory and the

modifications and proposals of new one is crucial.

Harrod - Domar Growth Model stresses that people must invest money for future use and

that the growth of an economy is through an adjustment of demand in capital stock. The bad thing

about Harrod - Domar it only focuses on the goal of saving investment to achieve higher per capita

income. By focusing so much through investments it does not realize the status of its beneficiaries.

This will be applicable to those people who are capable of investing huge amount of money.

However, not all people could afford to save money for there are things that are more important

and necessary for them to acquire.

In relation to the data of Sitio Sabang, Pandan Cabusao, Camarines Sur, the figure 30

shows that the per capita income of one household have is relatively low. In the data Cabusao is

consider to be poor because of the low capita income of each households based on the data. Figure

no. 30. If Cabusao’s most households have low capita per income probably many of them will not

be able to invest a large sum of money. However, if the government could afford to give aid then

there are possibilities that their income would grow. Government will cover a lot of benefit that

may reduce the daily expense of the citizen. Thus, less expenses and more savings for them.

Patterns of Development

The Patterns of Development of Hollis B. Chenery stated that “Capital accumulation added

by changes in economic structure is needed.” Indeed, increasing capital will enhance the country
to grow so the Sitio Sabang Barangay Pandan Cabusao must have a way to increase their capital

in their barangay. However, most of the individuals living in the area has no job as shown in figure

5. Capital accumulation suggested by this theory cannot be achieved by the individuals living in

the area because their family incomes was relatively low to accommodate to save money as shown

in figure 30 and with numerous expenses attained by the family can hinder them to save money

shown in figures 19 to 25. Moreover, in figure 24 there are 57 household have a loan amounting

P1500 that is same amount to their family monthly is impossible to save money. The number of

individuals who has no job are higher than the number of those individuals shown in figure 5 so

unemployment is one of the problems that causes the families living in this barangay cannot afford

a standard living.

This theory has feature characteristics that will help the economy grow and to develop that

this barangay can use it to attain development. The shift from Agricultural to Industrial Production,

this barangay has no capability to invest machineries because of lack in capital and therefore they

cannot acquire a steady accumulation of Physical and Human capital because almost individuals

living in this barangay are students below 18 years old and because most of them are self-employed

that only acquire incomes less than the expenses they tend to pay everyday.

This theory will not help the community of Sitio Sabang because the fact that most

residents incurred more expenses in buying non-basic needs rather than the important things that

is relevant with their family. However, this theory would help undeveloped community to be

developed in other ways. But according to the data gathered that shows the present situation of the

community, it’s impossible but the researchers discover that lack of job and skill is not the only

factors in experiencing poverty but also having the right decisions of people. To conclude, they
need to be reasonable enough on their expenses and prioritize their basic needs so that this theory

will be applicable in the betterment of their present situation.

Chapter 4

Results and Findings

 Bibliography

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Publishing Company.

Retrieved from: Gillis, M., Perkins, D. H., Roemer, M., & Snodgrass, D. R. (1992). Economics

of development (No. Ed. 3). WW Norton & Company, Inc..

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counter-revolution in development economics (No. HD82 T75 1993). Oxford: Blackwell.

Retrieved from: Ray, D. (2008). Development economics (pp. 1364-1379). Palgrave Macmillan

UK.

Retrieved from: Lewis, W. Arthur. Theory of economic growth. Routledge, 2013.