-1- 『国際開発研究フォーラム』30(2005. 9) Forum of International Development Studies, 30(Sep. 2005) Labor Productivity and Inter-Sectoral Reallocation of Labor in Singapore (1965-2002)* K. Ali AKKEMIK** Abstract This paper investigates the impact of the shifts of labor across sectors on aggregate productivity growth through a decomposition of aggregate productivity growth in Singapore over the period 1965-2002. The static shift-share analysis is utilized to for this purpose. The results show that the shifts of labor paid off well in terms of their contribution to labor productivity especially for manufacturing in the 1985 era which was characterized by interventionist labor market policies of the government. On the other hand, the impact of labor shifts is negative in the post-1985 era which is characterized by a more liberalized labor market. I. Introduction Long-run economic growth can be sustained by continuous increases in productivity. Economic growth also brings about changes in the input composition of the economy. Scarce resources are shifted from less productive activities to more productive activities. The impact of the shifts of resources across the sectors of the economy on economic growth and productivity has recently attracted attention of many researchers. Now, there is a large literature on the impact of changes in sectoral labor composition on aggregate productivity for developing as well as developed countries (e.g. Salter 1960, Syrquin 1984 and 1986, and Timmer and Szirmai 2000). These studies focus on the shift of labor and capital from primary sectors (e.g. agriculture) to manufacturing and services sectors. They specifically point to the positive contribution of resource reallocation from low-productivity sectors (most likely agriculture and traditional manufacturing industries such as textile manufactures) to sectors and industries that exhibit higher productivity (such as electronics, basic metals, and transport equipment industries). It is found, however, that the shifts of resources for most developing countries are not conducive for productivity growth. Somewhat similar evidence was found in Akkemik (2005) in a study covering Japan, Korea, and Singapore for the last three decades of the 20 th century. In Singapore industrialization was initiated by the government and sustained economic growth has been a major concern for the government. Being involved deeply in economic decision-making, the government has directed the shifts of resources towards more productive areas. It is important *This paper is derived from a chapter of a thesis to be submitted for the degree of PhD at Nagoya University. I would like to acknowledge the debt to my main supervisor Professor H. Osada, who checked two earlier drafts of this paper and provided helpful comments, for his support and encouragement. The comments by two anonymous referees were useful. Finally, fruitful discussions with seminar members working under Professor Osada are greatly acknowledged. **The author is a PhD candidate at Nagoya University, Graduate School of International Development. Correspondence: [email protected]
22
Embed
Labor Productivity and Inter-Sectoral Reallocation of … 1965-1978 (early post-independence rapid growth years), 1979-1985 (economic restructuring), and post-1985 (post-recession
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
-1-
『国際開発研究フォーラム』30(2005. 9)
Forum of International Development Studies, 30(Sep. 2005)
Labor Productivity and Inter-Sectoral Reallocation of Labor inSingapore (1965-2002)*
K. Ali AKKEMIK**
Abstract
This paper investigates the impact of the shifts of labor across sectors on aggregate
productivity growth through a decomposition of aggregate productivity growth in
Singapore over the period 1965-2002. The static shift-share analysis is utilized to for this
purpose. The results show that the shifts of labor paid off well in terms of their
contribution to labor productivity especially for manufacturing in the 1985 era which was
characterized by interventionist labor market policies of the government. On the other
hand, the impact of labor shifts is negative in the post-1985 era which is characterized by
a more liberalized labor market.
I. Introduction
Long-run economic growth can be sustained by continuous increases in productivity. Economic
growth also brings about changes in the input composition of the economy. Scarce resources are
shifted from less productive activities to more productive activities.
The impact of the shifts of resources across the sectors of the economy on economic growth and
productivity has recently attracted attention of many researchers. Now, there is a large literature
on the impact of changes in sectoral labor composition on aggregate productivity for developing as
well as developed countries (e.g. Salter 1960, Syrquin 1984 and 1986, and Timmer and Szirmai
2000). These studies focus on the shift of labor and capital from primary sectors (e.g. agriculture) to
manufacturing and services sectors. They specifically point to the positive contribution of resource
reallocation from low-productivity sectors (most likely agriculture and traditional manufacturing
industries such as textile manufactures) to sectors and industries that exhibit higher productivity
(such as electronics, basic metals, and transport equipment industries). It is found, however, that
the shifts of resources for most developing countries are not conducive for productivity growth.
Somewhat similar evidence was found in Akkemik (2005) in a study covering Japan, Korea, and
Singapore for the last three decades of the 20th century.
In Singapore industrialization was initiated by the government and sustained economic growth
has been a major concern for the government. Being involved deeply in economic decision-making,
the government has directed the shifts of resources towards more productive areas. It is important
*This paper is derived from a chapter of a thesis to be submitted for the degree of PhD at Nagoya University.I would like to acknowledge the debt to my main supervisor Professor H. Osada, who checked two earlierdrafts of this paper and provided helpful comments, for his support and encouragement. The comments bytwo anonymous referees were useful. Finally, fruitful discussions with seminar members working underProfessor Osada are greatly acknowledged. **The author is a PhD candidate at Nagoya University, Graduate School of International Development.
1 The information here is largely extracted from Carling (1995).
2 NWC consisted of representatives from the government, labor unions, and employees. In this way, the gov-
ernment could effectively control the industrial relations.
3 Central Provident Fund (CPF) is the national pension fund of Singapore. Both employers and employees
compulsorily contribute to the employee’s account in CPF. Singaporean government collects the “forced
Labor Productivity and Inter-Sectoral Reallocation of Labor in Singapore (1965-2002)
-20-
Table 6 Annual percentage share of sectors and industries in total employment
Note: The figures for manufacturing industries refer to their share in the manufacturing sector only. Source: Author’s calculations based on the data whose sources are described in the text
AGR
MIN
UTIL
CONST
COM
TR-COM
FIN-BUS
OTH-SERV
MANUF
Food
Tex
Wear
Leat
Wood
Furn
Paper
Pub
Chem
Petr
Rub
Non-met
Met
Fab-met
Mach
Elec
Prec
Tran
Oth-man
1966-1978
1.2
0.3
2.4
5.3
21.2
10.3
7.8
25.7
25.8
9.3
4.9
10.5
0.6
6.7
1.4
1.9
5.3
2.8
1.4
6.4
3.3
1.4
6.3
5.1
15.4
2.0
11.1
4.3
1979-1985
1.1
0.2
0.8
7.2
23.8
11.7
8.3
22.2
24.7
5.0
2.3
10.4
0.4
2.7
2.4
1.5
4.7
2.5
1.3
4.2
2.2
0.8
7.2
7.7
30.4
2.4
9.7
2.2
1986-2002
0.4
0.0
0.5
7.4
22.9
10.8
14.2
22.9
20.8
4.2
0.7
5.5
0.2
0.6
1.8
1.4
4.9
3.6
1.0
5.2
1.8
0.6
9.2
8.9
36.8
2.5
9.1
1.7
savings” of its citizens by this way. The CPF account is used by the account holder to pay for education,
health, and housing expenses of himself or his family. The account holder earns an interest on his savings
in his CPF account. Therefore, CPF acts more like a saving institution, rather than simply a pension fund.
4 Hodrick-Prescott filter can be explained as follows. When original series xt is composed of a trend compo-
nent and a cyclical component , where t denotes time (t = 1, 2, T).
Hodrick and Prescott (1997) suggest that with the following minimization method, the cyclical component ct
can be isolated from the original series xt.
where λ is the smoothing parameter (also named penalty parameter). The first term in this minimization
function, the sum of the squares of deviations, penalizes the variance of ct. The second term, the summa-
tion of the second differences of the trend component τt multiplied by the smoothing parameter λ, places a
penalty to the lack of smoothness in τt, i.e. a penalty on the variations in the growth rate of the trend com-
ponent with the degree of penalization directly proportional to the value of the parameter λ chosen.
Although the Hodrick-Prescott filter is easy to use, the selection of the appropriate value for the smoothing
parameter appears as the major drawback. If λ approaches to 0, the trend component is almost equal to
the original series, and if diverges to an infinitely large number, a linear trend is achieved. Hodrick and
Prescott (1997) recommend setting the value of λ to 100 for annual data. I follow this tradition.
5 The inspiration in searching for long-run trends in labor productivity and wages here comes from a study by
Voyvoda and Yeldan (1999) on Turkey.
6 Using the same methodology for an analysis of the productivity slowdown in the US, Beebe and Haltmaier
(1980) name the intra-industry and shift effects as “rate” and “level” effects, respectively.
7 Timmer and Szirmai (2000) report some shortcomings of the shift-share analysis. For example, the shift of
low-productivity and low-skilled agricultural labor into industry leads to an increase in the average produc-
tivity in agriculture. In the shift-share analysis, this increase in agricultural labor productivity is included
in the intra-industry productivity growth effect, but in fact it was caused by labor shift. This may lead to
an underestimation of shift effects. Productivity levels may be dependent also on the quality of labor. If
labor shifts towards industries with higher productivity due to higher labor skills, shift effects includes
improved labor quality which results in overestimation of shift effects.
8 To avoid confusion about the word “shift,” note that the shift of labor does not necessarily mean physical
transfer of labor from one sector to another. Total labor force may be growing but some sectors may be
receiving more labor than the others.
References
Akkemik, K. Ali. 2005. Structural Change and Its Impact on Productivity in Japan, Korea, and Singapore
(1970-2000). Forum of International Development Studies 28: 25-44.
minτ
τ λ τ τ τ τt t
T xt t t t t tt
T
t
T
{ } + −=
−
==
−( ) + −( ) − −( )[ ]
∑∑
1
2
1 1
2
2
1
1
c x x ct t t t
T
t t t−{ }( ) = +=
τ τ1
:τ τt t t
T{ }( )=1
-21-
Beebe, Jack and Jane Haltmaier. 1980. An Intersectoral Analysis of the Secular Productivity Slowdown.
Federal Reserve Bank of San Francisco Economic Review Fall 1980: 7-28.
Carling, Robert G. 1995. Labor Market Policies. In Bercuson, Kenneth (ed.), Singapore: A Case Study in
Rapid Development. International Monetary Fund Occasional Paper No. 119: 29-33.
Fagerberg, Jan. 2000. Technological Progress, Structural Change and Productivity Growth: A Comparative
Study. Structural Change and Economic Dynamics 11: 393-411.
Hodrick, R. J. and E. C. Prescott. 1997. Postwar US Business Cycles: An Empirical Investigation. Journal of
Money, Credit and Banking 29: 1-16.
Jalava, Jukka, S. Heikkinen, and R. Hjerppe. 2002. Technology and Structural Change: Productivity in the
Finnish Manufacturing Industries, 1925-2000. Paper presented at “XIII Economic History Congress,”
Buenos Aires, 28 June 2002.
MTI (Ministry of Trade and Industry, Republic of Singapore). 2001. Singapore’s Productivity Performance.
In Economic Survey of Singapore, First Quarter 2001, pp. 40-48.
Salter, W. E. G. 1960. Productivity and Technical Change. University of Cambridge Department of Applied
Economics Monographs. Cambridge: University Press.
Singapore Department of Statistics. Yearbook of Statistics, various years.
Singapore Department of Statistics. Report on the Census of Industrial Production, various years.
Singapore Department of Statistics. Singapore System of National Accounts, 1995.
Syrquin, Moshe. 1984. Resource Reallocation and Productivity Growth. In Moshe Syrquin, Lance Taylor,
and Larry E. Westphal (eds.), Economic Structure and Performance — Essays in Honor of Hollis B.
Chenery. Orlando, Florida: Academic Press, pp. 75-101.
Syrquin, Moshe. 1986. Productivity Growth and Factor Reallocation. In Hollis Chenery, Sherman Robinson,
and Moshe Syrquin (eds.), Industrialization and Growth: A Comparative Study. Published for the World
Bank by Oxford University Press, pp. 229-262.
Syrquin, Moshe. 1995. Patterns of Structural Change. In H. Chenery and T. N. Srinivasan, eds., Handbook
of Development Economics, Volume 1. Elsevier, pp. 203-273.
Timmer, Marcel P. and A. Szirmai. 2000. Productivity Growth in Asian Manufacturing: The Structural
Bonus Hypothesis Examined. Structural Change and Economic Dynamics 11: 371-392.
Van Ark, Bart and M. Timmer. 2003. Asia’s Productivity Performance and Potential: The Contribution of
Sectors and Structural Change. Paper presented at the conference “Leading East Asia in the 21st Centu-
ry,” Tokyo, 30 May 2003.
Voyvoda, Ebru and A. Erinç Yeldan (1999). Patterns of Productivity Growth and the Wage Cycle in Turkish
Manufacturing. Paper presented at the “METU Economic Research Conference III,” Ankara, September
1999.
Labor Productivity and Inter-Sectoral Reallocation of Labor in Singapore (1965-2002)