THREE ESSAYS ON ECONOMIC GROWTH IN SINGAPORE

Abstract

This dissertation is a collection of three relatively independent essays on economic growth in Singapore. In the first chapter, I construct a low-frequency macroeconometric model to investigate the association between eight key macroeconomic variables, consisting of FDI net inflows, gross fixed capital formation, openness to trade, labor compensation, unit labor costs, domestic credit to private sector, real interest rate, and capital stock, and a variety of relevant macroeconomic variables in Singapore for the period 1980-2009. The model contains two submodels: a multivariate autoregressive integrated moving average (ARIMA) model and an enhanced first-order autoregressive distributed lag (ADL) model. My results are broadly consistent with evidence from previous empirical studies, and have important policy implications for characterizing Singapore’s medium- and long-term growth path. The second chapter re-estimates the contributions of various inputs to Singapore’s output growth for the period 1980-2009. To address the impact of quality-adjusted human capital and time-varying factor shares on these contributions, I extend the translog production function approach developed by Jorgenson et al. (1987) by incorporating human-capital-adjusted labor and the assumption of time-varying shares of physical capital. The results show that a decline in capital deepening is partly offset by improvements in labor quality and procyclical productivity growth. They also imply that estimation of contributions of various inputs without considering quality-adjusted labor input is biased. In the third chapter, I measure the contemporaneous and one-period-lagged effects of the level of economic development, R&D spending, FDI net inflows, and infrastructure on innovation using a unique panel data set of 17 Group of Twenty (G20) countries and the European Union (EU) as a whole for the period 1996-2011. Additionally, I examine and compare the innovation trends in Singapore with the empirical results in different country groups of the G20 to explore the determinants of innovation in Singapore. This essay highlights the economic importance of R&D spending and infrastructure relative to that of FDI net inflows and the level of economic development addressed in traditional studies. It also implies that routinely pooling developed and developing countries can result in misleading conclusions and inappropriate policy recommendations. Besides relying on infrastructure to promote innovation, Singapore ought to apply R&D and technology spillovers to domestic enterprises more efficiently.