FACTORS SHAPING MALAYSIA'S MANUFACTURING PRODUCTIVITY GROWTH

Productivity indicators within the Malaysian manufacturing sector for the period of 1970–2001 were compared. Two variation models were generated from the production functions to measure manufacturing sector productivity growth. The first model is an extensive growth theory model and the second is an intensive growth theory model. The extensive theory model had a gap that cast doubt in the results. A statistical analysis was provided to close this gap. The results show a slowdown in the contribution of Total Factor Productivity (TFP) growth and low growth of labor productivity of the sector. A negative impact of quality of inputs used by the sector was observed in the contribution of TFP, TFP per unit of labor and labor productivity growth in comparison with other productivity indictors of the sector. The study finds that productivity growth of Malaysia's manufacturing sector is input-driven rather than TFP-driven.