A comparative analysis of Singapore and Malaysia: Is there a general pattern for catching-up economies?

Abstract: This paper aims at identifying the general determinants of the catching-up process. A tentative theory of catch-up, which takes several conventional determinants into account, is deliberately set up on the basis of previous research in this area. The comparative analysis of Singapore and Malaysia provides empirical evidences for testing those determinants. This study mainly focuses on the role of structural change in the catching-up process, while some other determinants including TFP, FDI, export, and the relationships among them are investigated as well. The study result suggests that structural change does not necessarily lead to success in the catching-up, although it significantly contributes to it. Instead, the successful catching-up is determined by internal labor productivity. It also bears out that in contradiction to conventional views, TFP plays decisive role in the catching-up economies. The role of export, as well FDI, is emphasized; however, there plausibly exists thresholds regarding the effect of FDI.