| returns to scale, and productivity: a case study of Singapore’s manufacturing sector. Policy Research Working Paper No. 2857. The World Bank (2007) | |||||||||||||||
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| We derive the dual approach of Hall (1988). We show that both primal and dual TFP growth underestimate true productivity growth if there is imperfect competition or decreasing returns to scale. Contradicting Roeger (1995), we show that imperfect competition alone could not explain the differences between primal and dual TFP growth if factor shares remain constant. Correcting for input endogeneity and selection bias, we estimate industry markups and scale coefficients of Singapore’s manufacturing sector with both the primal and dual approaches. Results indicate that all industries violate one or both of the neoclassical assumptions. Controlling for imperfect competition and non-constant returns to scale, the estimated growth rate of productivity of the sector doubles the conventional growth accounting measures. (JEL # E23, F12, O47) | |||||||||||||||
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