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Growth Accounting for a Follower-Economy in a World of Ideas: The Example of Singapore

  • Kong Weng Ho

    (Division of Economics,School of Humanities and Social Sciences, Nanyang Technological University, Singapore)

  • Hian Teck Hoon

    (Singapore Management University, Singapore)

In this paper, we take another approach to accounting for the sources of Singapore’s economic growth by being explicit about the channels through which Singapore, as a technological follower, benefits from international R&D spillovers. Taking into account the channels through which technology developed in the G5 countries diffuses to technological followers, we show that 57.5 percent of Singapore’s real GDP per worker growth rate over the 1970-2002 period is due to multifactor productivity growth. In particular, about 52 percent of the growth is accounted for by an increase in the effectiveness of accessing ideas developed by the technology leaders through improvement in our educational quality and increase in machinery imports and foreign direct investment from the G5 countries. We also find that capital accumulation that takes the form of imports of machinery as well as foreign direct investment from the G5 countries enhances the effectiveness of technology transfer thus raising the rate of return to capital. Compared to the rate of return to capital inferred from the traditional Solow growth model with purely exogenous technological progress of 10.8 percent, taking into account the technology transfer channel raises the implied rate of return to 13 percent.

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File URL: http://www.ntu.edu.sg/hss2/egc/wp/2006/2006-06.pdf
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Paper provided by Nanyang Technological University, School of Humanities and Social Sciences, Economic Growth Centre in its series Economic Growth Centre Working Paper Series with number 0606.

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Length: 62 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:nan:wpaper:0606
Contact details of provider: Postal: Nanyang Drive, Singapore 637332
Fax: 6795 5797
Web page: http://egc.hss.ntu.edu.sg/
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