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 prod...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, D.C.
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2002/06/1943367/markups-returns-scale-productivity-case-study-singapores-manufacturing-sector http://hdl.handle.net/10986/14284 |
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okr-10986-142842021-04-23T14:03:20Z Markups, Returns to Scale, and Productivity: A Case Study of Singapore's Manufacturing Sector Kee, Hiau Looi AGGREGATE DEMAND AGGREGATE LEVEL ANNUAL GROWTH ANNUAL GROWTH RATE AVERAGE ANNUAL GROWTH AVERAGE GROWTH AVERAGE GROWTH RATE AVERAGE PRODUCTIVITY AVERAGE PRODUCTIVITY GROWTH BUSINESS CYCLE CAPITAL ACCUMULATION CAPITAL GOODS CAPITAL INPUT CAPITAL INVESTMENT CAPITAL STOCK CAPITAL STOCK GROWTH COMPETITIVENESS CONSTANT RETURNS CONSTANT RETURNS TO SCALE COST MINIMIZATION DATA AVAILABILITY DECREASING RETURNS DEPENDENT VARIABLE DEVELOPMENT RESEARCH ECONOMIC DEVELOPMENT ELASTICITY EMPIRICAL MODEL EMPIRICAL SECTION EMPLOYMENT EQUATIONS ERROR TERM ESTIMATED COEFFICIENT ESTIMATED COEFFICIENTS FACTOR ACCUMULATION FIXED EFFECTS GROWTH ACCOUNTING GROWTH RATE GROWTH RATE OF OUTPUT GROWTH RATES HUMAN CAPITAL IMPERFECT COMPETITION INPUT PRICES INTERMEDIATE INPUT INTERNATIONAL TRADE LABOR INPUT MARGINAL COST MARKET POWER NEOCLASSICAL MODEL OIL PERFECT COMPETITION POINT ESTIMATES POLICY RESEARCH PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PRODUCTIVITY GROWTH RATE OF RETURN REGRESSION ANALYSIS RETURN TO CAPITAL RETURNS TO SCALE SHARE OF LABOR SUPPLY OF LAND TECHNOLOGICAL PROGRESS TFP TOTAL FACTOR PRODUCTIVITY TOTAL REVENUE TRADE LIBERALIZATION TRANSPORT UNIT COST FUNCTION UNIT OF CAPITAL VALUE ADDED WAGES MARKUP MANUFACTURING SECTOR PRIVATE SECTOR DEVELOPMENT RETURNS TO SCALE PRODUCTIVITY CASE STUDIES TOTAL FACTOR PRODUCTIVITY GROWTH RATE REGRESSION ANALYSIS PRODUCTIVITY GROWTH 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. 2013-06-28T12:45:52Z 2013-06-28T12:45:52Z 2002-06 http://documents.worldbank.org/curated/en/2002/06/1943367/markups-returns-scale-productivity-case-study-singapores-manufacturing-sector http://hdl.handle.net/10986/14284 English en_US Policy Research Working Paper;No.2857 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, D.C. Publications & Research :: Policy Research Working Paper Publications & Research East Asia and Pacific Singapore |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
AGGREGATE DEMAND AGGREGATE LEVEL ANNUAL GROWTH ANNUAL GROWTH RATE AVERAGE ANNUAL GROWTH AVERAGE GROWTH AVERAGE GROWTH RATE AVERAGE PRODUCTIVITY AVERAGE PRODUCTIVITY GROWTH BUSINESS CYCLE CAPITAL ACCUMULATION CAPITAL GOODS CAPITAL INPUT CAPITAL INVESTMENT CAPITAL STOCK CAPITAL STOCK GROWTH COMPETITIVENESS CONSTANT RETURNS CONSTANT RETURNS TO SCALE COST MINIMIZATION DATA AVAILABILITY DECREASING RETURNS DEPENDENT VARIABLE DEVELOPMENT RESEARCH ECONOMIC DEVELOPMENT ELASTICITY EMPIRICAL MODEL EMPIRICAL SECTION EMPLOYMENT EQUATIONS ERROR TERM ESTIMATED COEFFICIENT ESTIMATED COEFFICIENTS FACTOR ACCUMULATION FIXED EFFECTS GROWTH ACCOUNTING GROWTH RATE GROWTH RATE OF OUTPUT GROWTH RATES HUMAN CAPITAL IMPERFECT COMPETITION INPUT PRICES INTERMEDIATE INPUT INTERNATIONAL TRADE LABOR INPUT MARGINAL COST MARKET POWER NEOCLASSICAL MODEL OIL PERFECT COMPETITION POINT ESTIMATES POLICY RESEARCH PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PRODUCTIVITY GROWTH RATE OF RETURN REGRESSION ANALYSIS RETURN TO CAPITAL RETURNS TO SCALE SHARE OF LABOR SUPPLY OF LAND TECHNOLOGICAL PROGRESS TFP TOTAL FACTOR PRODUCTIVITY TOTAL REVENUE TRADE LIBERALIZATION TRANSPORT UNIT COST FUNCTION UNIT OF CAPITAL VALUE ADDED WAGES MARKUP MANUFACTURING SECTOR PRIVATE SECTOR DEVELOPMENT RETURNS TO SCALE PRODUCTIVITY CASE STUDIES TOTAL FACTOR PRODUCTIVITY GROWTH RATE REGRESSION ANALYSIS PRODUCTIVITY GROWTH |
| spellingShingle |
AGGREGATE DEMAND AGGREGATE LEVEL ANNUAL GROWTH ANNUAL GROWTH RATE AVERAGE ANNUAL GROWTH AVERAGE GROWTH AVERAGE GROWTH RATE AVERAGE PRODUCTIVITY AVERAGE PRODUCTIVITY GROWTH BUSINESS CYCLE CAPITAL ACCUMULATION CAPITAL GOODS CAPITAL INPUT CAPITAL INVESTMENT CAPITAL STOCK CAPITAL STOCK GROWTH COMPETITIVENESS CONSTANT RETURNS CONSTANT RETURNS TO SCALE COST MINIMIZATION DATA AVAILABILITY DECREASING RETURNS DEPENDENT VARIABLE DEVELOPMENT RESEARCH ECONOMIC DEVELOPMENT ELASTICITY EMPIRICAL MODEL EMPIRICAL SECTION EMPLOYMENT EQUATIONS ERROR TERM ESTIMATED COEFFICIENT ESTIMATED COEFFICIENTS FACTOR ACCUMULATION FIXED EFFECTS GROWTH ACCOUNTING GROWTH RATE GROWTH RATE OF OUTPUT GROWTH RATES HUMAN CAPITAL IMPERFECT COMPETITION INPUT PRICES INTERMEDIATE INPUT INTERNATIONAL TRADE LABOR INPUT MARGINAL COST MARKET POWER NEOCLASSICAL MODEL OIL PERFECT COMPETITION POINT ESTIMATES POLICY RESEARCH PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PRODUCTIVITY GROWTH RATE OF RETURN REGRESSION ANALYSIS RETURN TO CAPITAL RETURNS TO SCALE SHARE OF LABOR SUPPLY OF LAND TECHNOLOGICAL PROGRESS TFP TOTAL FACTOR PRODUCTIVITY TOTAL REVENUE TRADE LIBERALIZATION TRANSPORT UNIT COST FUNCTION UNIT OF CAPITAL VALUE ADDED WAGES MARKUP MANUFACTURING SECTOR PRIVATE SECTOR DEVELOPMENT RETURNS TO SCALE PRODUCTIVITY CASE STUDIES TOTAL FACTOR PRODUCTIVITY GROWTH RATE REGRESSION ANALYSIS PRODUCTIVITY GROWTH Kee, Hiau Looi Markups, Returns to Scale, and Productivity: A Case Study of Singapore's Manufacturing Sector |
| geographic_facet |
East Asia and Pacific Singapore |
| relation |
Policy Research Working Paper;No.2857 |
| description |
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. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Kee, Hiau Looi |
| author_facet |
Kee, Hiau Looi |
| author_sort |
Kee, Hiau Looi |
| title |
Markups, Returns to Scale, and Productivity: A Case Study of Singapore's Manufacturing Sector |
| title_short |
Markups, Returns to Scale, and Productivity: A Case Study of Singapore's Manufacturing Sector |
| title_full |
Markups, Returns to Scale, and Productivity: A Case Study of Singapore's Manufacturing Sector |
| title_fullStr |
Markups, Returns to Scale, and Productivity: A Case Study of Singapore's Manufacturing Sector |
| title_full_unstemmed |
Markups, Returns to Scale, and Productivity: A Case Study of Singapore's Manufacturing Sector |
| title_sort |
markups, returns to scale, and productivity: a case study of singapore's manufacturing sector |
| publisher |
World Bank, Washington, D.C. |
| publishDate |
2013 |
| url |
http://documents.worldbank.org/curated/en/2002/06/1943367/markups-returns-scale-productivity-case-study-singapores-manufacturing-sector http://hdl.handle.net/10986/14284 |
| _version_ |
1764429912801804288 |