Third Asia KLEMS Conference August 2015 Structural Change and Productivity Growth in Asian Countries: Empirical Evidence and Singapore’s Experience Dr. Vu Minh Khuong, Associate Professor LKY School of Public Policy, National University of Singapore
Outline Structural change and economic growth in Asian countries The case of Singapore Policy implications 2
Outline Structural change and economic growth in Asian countries The case of Singapore Policy implications 3
Measures of structural change 4
Effective structural change (ESCI) by Country: Summary statistics 5
Structural change patterns (1) 6
Structural change patterns (2) 7
Structural change patterns (3) 8
Structural change patterns (4) 9
Structural change and growth: The Case of Korea and the Philippines 10
Structural change and growth: Empirical evidence (1) y(t)=ALP growthy(t)=GDP per capita growthy(t)=Average wage growth LSDVGMMLSDVGMMLSDVGMM (1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12) Income(t-1) **-1.480* * *-0.663** (0.335)(0.598)(0.344)(0.368)(0.287)(0.870)(0.220)(0.202)(0.450)(1.020)(0.315)(0.307) y(t-1) **0.211**0.243***0.283***0.411***0.480***0.143***0.148***0.203***0.219*** (0.037)(0.039)(0.086)(0.087)(0.062)(0.071)(0.052)(0.058)(0.038)(0.039)(0.057)(0.058) ESCI0.642***0.594***0.583***0.558***0.204***0.171***0.233***0.208***0.787***0.796***0.977***1.015*** (0.066) (0.144)(0.147)(0.066)(0.059)(0.061)(0.058)(0.096)(0.098)(0.145)(0.140) Country FEYes Time FENoYesNoYesNoYesNoYesNoYesNoYes AR(2) test p- value Adj-R N
Structural change and growth: Empirical evidence (2) y(t)=Employment growthy(t)=GDP growthy(t)=TFP growth LSDVGMMLSDVGMMLSDVGMM (1)(2)(3)(4)(5)(6)(7)(8)(9)(10)(11)(12) Income(t-1)-1.220***-0.905** *** **-0.348*2.680*** * (0.207)(0.389)(0.208)(0.215)(0.282)(0.875)(0.187)(0.181)(0.567)(0.733)(0.156)(0.129) y(t-1) ***0.290***0.383***0.443***0.944***0.954***1.003***0.956*** (0.068)(0.069)(0.155)(0.150)(0.062)(0.073)(0.040)(0.052)(0.016)(0.015)(0.011)(0.012) ESCI-0.341***-0.345***-0.274***-0.292***0.211***0.176***0.253***0.215***0.451***0.411***0.379*** (0.059)(0.056)(0.085)(0.086)(0.065)(0.059)(0.060)(0.053)(0.057)(0.052)(0.072)(0.064) Country FEYes Time FENoYesNoYesNoYesNoYesNoYesNoYes AR(2) test p- value Adj-R N
Outline Structural change and economic growth in Asian countries The case of Singapore Policy implications 13
Structural change and growth: The Case of Singapore 14
The contribution to ALP growth by sector, : Singapore vs. other Asian economies 15 Country ALP growth Contribution by Sector (Total=100) AgricultureMiningManufacturingConstructionUtilityTradeTransportFinance Community services Total services China-India China9.1% India5.2% Advanced economies Hong Kong2.7% Singapore1.7% Korea, Rep.2.6% Taiwan2.5% Japan0.9% ASEAN Brunei-0.8% Cambodia4.4% Indonesia3.5% Lao PDR4.6%0.0 Malaysia2.1% Myanmar9.0%0.0 Philippines2.2% Thailand2.5% Vietnam4.4% South Asia Bangladesh2.5% Nepal1.2% Pakistan1.1% Sri Lanka4.2%
The contribution to GDP growth by sector, : Singapore vs. other Asian economies 16 Country GDP growth Contribution by Sector (Total=100) AgricultureMiningManufacturingConstructionUtilityTradeTransportFinance Community & social services Total services China-India China9.7% India7.0% Advanced economies Hong Kong3.8% Singapore5.4% Korea, Rep.3.9% Taiwan3.7% Japan 0.7% ASEAN Brunei1.5% Cambodia7.6% Indonesia5.3% Lao PDR7.1% Malaysia4.7% Myanmar10.5% Philippines4.7% Thailand4.3% Vietnam6.9% South Asia Bangladesh5.8% Nepal3.8% Pakistan4.3% Sri Lanka5.4%
Growth by sector: Singapore vs. Taiwan 17 Indicator Singapore Taiwan GDP EMPALP GDP EMPALP TOTAL 5.4%3.7%1.7%3.7%1.2%2.5% Agriculture , hunting , forestry and fishing 0.9%7.1%-6.3%0.5%-2.6%3.0% Mining and quarrying %-8.4%5.9% Manufacturing 5.2%1.5%3.7%6.4%0.9%5.5% Electricity, gas and water supply 3.8%2.7%1.1%2.6%-0.2%2.8% Construction 3.3%3.2%0.0%-0.4%0.1%-0.5% Wholesale and retail trade, repair of vehicles, hotels and restaurants 5.6%3.8%1.8%3.1%1.2%1.9% Transport, storage and communications 4.0%3.4%0.6%3.1%0.2%2.9% Financial intermediation, real estate, renting and business activities 5.3%5.6%-0.3%2.5%2.8%-0.2% …Financial intermediation 6.3%1.5% Community, social and personal services 4.8%4.9%-0.1%2.5%2.3%0.1%
Singapore’s financial sector: key success factors Opportunities: the rise of Asia Strategy Positioning: Regional hub World-class infrastructure and labor force Top-notch business environment Execution MAS The role of government: Regulating; Enabling; Stabilizing; and Legitimating ICT 18
Outline Structural change and economic growth in Asian countries The case of Singapore Policy implications 19
Policy implications Structural change plays a important role in driving economic growth, especially in developing countries. The government can foster structural change through different policy channels: Openness (to trade and FDI); Investment incentives; Facilitation of movement of productive factors (labor, capital, land); Improvement of business environment and labor force quality; Knowledge acquisition and innovation; and Integration within the economy and coordination among government agencies. The government should pay a special attention to manufacturing, trade, and financial services -- the three most important sectors in driving economic growth. 20
Thank You! 21