THE IMPACT OF R&D ON THE SINGAPOREAN ECONOMY OVER 1978–2019

• Published in: Singapore economic review 2023-11, p.1-27
• Main Authors: WONG, POH-KAM, HO, YUEN-PING, SINGH, ANNETTE
• Format: Article
• Language: English
• ISSN: 0217-5908; 1793-6837
• DOI: 10.1142/S0217590823500480

There has been a pronounced increase in research and development (R&D) expenditure in Singapore since the late 1990s, with government spending accounting for a sizeable share. This increase has been spurred by increasing public policy emphasis on research and innovation as engines of economic growth. Building upon earlier work ( Ho et al. , 2009 ; Ho and Wong , 2017 ), this paper provides an updated analysis of the impact of R&D on the economic performance of Singapore over four decades from 1978 to 2019 through the use of time series analysis. The Cobb–Douglas production function-based analysis shows a long-run equilibrium relationship between total factor productivity (TFP) and R&D investments. We found that in both long- and short-run productivity of R&D, Singapore tends to lag behind the Organization for Economic Cooperation and Development (OECD) nations. This suggests leakage of value capture and low absorptive capacity of local firms. Possibility of R&D productivity improvements induced by major policy changes over the last two decades was examined, but no evidence of significant structural breaks was found. Lastly, Granger causality analysis reveals that public sector R&D augments private sector R&D capital, thus playing an important role in generating externalities and spillover effects. Policy implications of our findings for Singapore are discussed.