The Impact of R&D on the Singapore Economy: A Time Series Analysis

This paper analyses the impact of R&D on economic performance in Singapore from 1978 to 2012 through the use of time series analysis. The Cobb-Douglas based analysis establishes a long-run equilibrium relationship between Total Factor Productivity (TFP) and R&D investments. We found that short-run productivity of R&D in Singapore is comparable to the smaller advanced economics in the OECD. However, in terms of long-run R&D productivity, Singapore lags slightly behind the smaller OECD nations and far behind the G7 countries. This suggests leakage of value capture and low absorptive capacity in local firms. Possibility of productivity improvements induced by policy changes in the 1990s was considered 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 and lessons for other middle-income countries are discussed.