Markups, returns to scale, and productivity : a case study of Singapore's manufacturing sector
The results of this paper challenge the conventional wisdom in the literature that productivity plays no role in the economic development of Singapore. Properly accounting for market power and returns to scale technology, the estimated average productivity growth is twice as large as the conventional total factor productivity (TFP) measures. Using a standard growth accounting (production function) technique, Young (1992, 1995) found no sign of TFP growth in the aggregate economy and the manufacturing sector of Singapore. Based on Young's results, Krugman (1994) claimed that there was no East Asia miracle as all the economic growth in Singapore could be attributed to its capital accumulation in the past three decades. Citing evidence on nondiminishing market rates of return to capital investment in Singapore during the period of fast growth as an indication of high productivity growth, Hsieh (1999) challenged Young's findings using the dual approach. But all of these papers maintained the assumptions of perfect competition and constant returns to scale and used only aggregate macro-level data. Kee uses industry level data and focuses on Singapore's manufacturing sector. She develops an empirical methodology to estimate industry productivity growth in the presence of market power and nonconstant returns to scale. The estimation of industry markups and returns to scale in this paper combines both the production function (primal) and the cost function (dual) approaches while controlling for input endogeneity and selection bias. The results of a fixed effect panel regression show that all industries in the manufacturing sector violate at least one of the two assumptions. Relaxing the assumptions leads to an estimated productivity growth that is on average twice as large as the conventional TFP calculation. Kee concludes that productivity growth plays a nontrivial role in the manufacturing sector.
|Date of creation:||30 Jun 2002|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Caballero, Ricardo J. & Lyons, Richard K., 1990. "Internal versus external economies in European industry," European Economic Review, Elsevier, vol. 34(4), pages 805-826, June.
- Roeger, Werner, 1995. "Can Imperfect Competition Explain the Difference between Primal and Dual Productivity Measures? Estimates for U.S. Manufacturing," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 316-30, April.
- Olley, G Steven & Pakes, Ariel, 1996.
"The Dynamics of Productivity in the Telecommunications Equipment Industry,"
Econometric Society, vol. 64(6), pages 1263-97, November.
- G. Steven Olley & Ariel Pakes, 1992. "The Dynamics of Productivity in the Telecommunications Equipment Industry," NBER Working Papers 3977, National Bureau of Economic Research, Inc.
- George S Olley & Ariel Pakes, 1992. "The Dynamics Of Productivity In The Telecommunications Equipment Industry," Working Papers 92-2, Center for Economic Studies, U.S. Census Bureau.
- Basu, Susanto & Fernald, John G, 1997.
"Returns to Scale in U.S. Production: Estimates and Implications,"
Journal of Political Economy,
University of Chicago Press, vol. 105(2), pages 249-83, April.
- Susanto Basu & John G. Fernald, 1996. "Returns to scale in U.S. production: estimates and implications," International Finance Discussion Papers 546, Board of Governors of the Federal Reserve System (U.S.).
- Alwyn Young, 1992. "A Tale of Two Cities: Factor Accumulation and Technical Change in Hong Kong and Singapore," NBER Chapters, in: NBER Macroeconomics Annual 1992, Volume 7, pages 13-64 National Bureau of Economic Research, Inc.
- James Levinsohn, 1991.
"Testing the Imports-as-Market-Discipline Hypothesis,"
NBER Working Papers
3657, National Bureau of Economic Research, Inc.
- Levinsohn, James, 1993. "Testing the imports-as-market-discipline hypothesis," Journal of International Economics, Elsevier, vol. 35(1-2), pages 1-22, August.
- Levinsohn, J., 1991. "Testing the Imports-As-Market-Discipline Hypothesis," Working Papers 272, Research Seminar in International Economics, University of Michigan.
- Hall, Robert E, 1988.
"The Relation between Price and Marginal Cost in U.S. Industry,"
Journal of Political Economy,
University of Chicago Press, vol. 96(5), pages 921-47, October.
- Robert E. Hall, 1986. "The Relation Between Price and Marginal Cost in U.S. Industry," NBER Working Papers 1785, National Bureau of Economic Research, Inc.
- Basu, S. & Fernald, J.G., 1993.
"Are Apparent Productive Spillovers a Figment of Specification Error,"
93-22, Michigan - Center for Research on Economic & Social Theory.
- Basu, Susanto & Fernald, John G., 1995. "Are apparent productive spillovers a figment of specification error?," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 165-188, August.
- Susanto Basu & John G. Fernald, 1995. "Are Apparent Productive Spillovers a Figment of Specification Error?," NBER Working Papers 5073, National Bureau of Economic Research, Inc.
- Susanto Basu & John G. Fernald, 1994. "Are apparent productive spillovers a figment of specification error?," International Finance Discussion Papers 463, Board of Governors of the Federal Reserve System (U.S.).
- James Levinsohn & Amil Petrin, 2003.
"Estimating Production Functions Using Inputs to Control for Unobservables,"
Review of Economic Studies,
Wiley Blackwell, vol. 70(2), pages 317-341, 04.
- James Levinsohn & Amil Petrin, 2000. "Estimating Production Functions Using Inputs to Control for Unobservables," NBER Working Papers 7819, National Bureau of Economic Research, Inc.
- Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
- Aw, Bee Yan & Chen, Xiaomin & Roberts, Mark J., 2001. "Firm-level evidence on productivity differentials and turnover in Taiwanese manufacturing," Journal of Development Economics, Elsevier, vol. 66(1), pages 51-86, October.
- Levinsohn, J. & Petrin, A., 1999. "When Industries Become More Productive, Do Firms?: Investigating Productivity Dynamics," Working Papers 445, Research Seminar in International Economics, University of Michigan.
- Young, Alwyn, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 641-80, August.
- Bartelsman, Eric J & Caballero, Ricardo J & Lyons, Richard K, 1994. "Customer- and Supplier-Driven Externalities," American Economic Review, American Economic Association, vol. 84(4), pages 1075-84, September.
- Harrison, Ann E., 1994. "Productivity, imperfect competition and trade reform : Theory and evidence," Journal of International Economics, Elsevier, vol. 36(1-2), pages 53-73, February.
- Chang-Tai Hsieh, 1999. "Productivity Growth and Factor Prices in East Asia," American Economic Review, American Economic Association, vol. 89(2), pages 133-138, May.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2857. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.