The Effect of Fragility on Labour Market Employment and Wages in the Philippines

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Fragility refers to weak regional institutions that fail to respond to specific risks and needs of the community. The article aims to measure fragility and its effects on labour market employment and wages. The observed non-work-related migration is used to derive annual fragility indices for regions that are then incorporated into standard labour market employment and Mincer wage equations. The estimates indicate higher employment but lower wages in fragile regions. Under weak institutions, workers will decide to engage in alternative low-paying work arrangements in anticipation of conflict, environmental or income shocks. Furthermore, biases on effects of macroeconomic policies can be noted in regression estimates that do not control for fragility.