TFP growth and resource allocation in Singapore, 1965–2002

This paper investigates the impact of the reallocations of resources across manufacturing industries on aggregate manufacturing TFP growth in Singapore for the period 1965–2002. This is done by decomposing aggregate TFP growth into its sources, TFP growth arising from within individual industries and from the reallocations of capital and labour. The results show that TFP growth was negative before 1985 but improved remarkably to positive figures after 1985. Resource reallocations are found to account for a large portion of this improvement in aggregate TFP growth.