A frontier approach to measuring total factor productivity growth in Singapore’s services sector

Although an East Asian miracle, Singapore has been singled out for experiencing insignificant total factor productivity (TFP) growth, thereby reflecting limited potential for long-term growth. Examines the validity of this statement for the services sector, which is an important engine of growth for Singapore. This is done using panel data with a stochastic frontier model, which, unlike the conventional growth accounting model used by previous studies, not only decomposes output growth into input growth and TFP growth but further decomposes TFP growth into technological progress and changes in technical efficiency. In addition, the stochastic frontier model incorporates the more realistic non-neutral shifting production frontier, as opposed to the commonly assumed Hicks-neutral production technology underlying a production function.