Estimating total factor productivity growth in Singapore at sectoral level using data envelopment analysis

Abstract

Trends in total factor productivity growth (TFPG) are examined in the ten major sectors of Singapore. Data are drawn from the Yearbook of Statistics, Singapore, (various issues) and Economic Survey of Singapore series ranging from the year 1985 to 2000. Due to the heterogeneous characteristic of each sector and non-availability of reliable input price data, this study uses a non-parametric, frontier methodology known as data envelopment analysis (DEA) to obtain the Malmquist Productivity Index at the sectoral level. The results can help Singapore identify the ‘best practice' sector and laggards in three aspects: efficiency change, technical change and TFPG, which is the qualitative productivity improvements needed for long-term economic growth. The three sets of productivity estimates are adjusted for effects of inflation and business cycles so that they are more reliable for policy implications. This exercise will provide a platform for more detailed study on the determinants of TFP growth in different sectors and at the firm level in Singapore.

Notes

¹ This is an openness indicator which is derived by dividing the sum of merchandise exports and imports by a country's GDP in US dollars.

² Copies of detailed calculations on adjustments using Wharton Method are available upon request.

³ Copies of detailed results for the ten sectors, sensitivity analysis and hypotheses tests are available upon request.