The conundrum of economic miracle: manufacturing growth without TFP growth

The findings of low or even negative total factor productivity (TFP) growth in Singapore's manufacturing industries by Young (1995) and many others has been a controversial issue in view of its crucial role in the future sustainability of Singaporean manufacturing. This paper applies the varying coefficients frontier model to re-examine productivity growth in Singapore's manufacturing at the 3-digit industry level over the period 1970–1997. The results indicate that Singapore's manufacturing has on average experienced a –0.8 percent TFP growth per annum although the extent of TFP growth improved slightly in the 1990s. The decomposition of TFP growth into technical efficiency change and technological progress, found technological regress is responsible for the negative TFP growth. Factor accumulation remains the principal contributor to the economic miracle of Singapore's manufacturing industries.