​A Shift-Share Analysis of Singapore's Labour Productivity Growth, 1998-2013

In this article, we examine the drivers of Singapore’s labour productivity growth in recent years. Specifically, using shift-share decomposition analysis, we examine whether our sectors have become more productive and whether our industry mix, in terms of employment shares, has shifted towards more productive sectors.

Between 2008 and 2013, overall productivity growth averaged 1.6 per cent per year, compared to 1.1 per cent per year in the preceding five years. Our decomposition results show that overall productivity growth in the last five years was supported by within-sector improvements in productivity, but was dragged down by a shift in employment towards less productive sectors.

Specifically, productivity growth in the various sectors contributed 2.3 percentage points to overall productivity growth each year on average in the last five years, higher than the 1.7 percentage-point contribution each year in the earlier five years.

However, the employment shares of less productive sectors grew relative to the shares of more productive sectors over the same period, thus dragging down overall productivity growth by 0.4 percentage-points each year. This was larger than the drag on productivity caused by similar negative shifts in the earlier 5-year period from 2003 to 2008 (at 0.2 percentage-points), and a reversal of the positive contribution that a shift in employment towards more productive sectors had between 1998 and 2003.

The views expressed in this paper are solely those of the author and do not necessarily reflect those of the Ministry of Trade and Industry or the Government of Singapore.

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