During the first half of the 1960s, two island countries with nearly identical l

Question

During the first half of the 1960s, two island countries with nearly identical levels of per capita real GDP—about $2,700—and the same populations—just over 1,700,000 at that time—became independent nations. One was Jamaica, and the other was Singapore. Since that time, Jamaica’s population has grown to 2,700,000 people. Singapore’s population has grown to 3,500,000. Today, Jamaica’s per capita real GDP is about $4,800. In contrast, Singapore’s per capita real GDP exceeds $31,000. Why has Jamaica’s per capita real GDP grown so much less than Singapore’s, even though Singapore’s population has increased at a faster pace? The fundamental answer is that people in Jamaica have considerably less economic freedom. In contrast to Singapore, which has business taxation and regulations rated among the least burdensome in the world, tax rates and regulatory rules in Jamaica rank among the most oppressive. As a consequence, rates of growth of saving, investment, and productivity—and, hence, per capita real GDP—in Jamaica have been far below corresponding growth rates in Singapore. In Jamaica, the cost of registering a business is 13 percent of the value of a firm’s capital, as compared with less than 0.2 percent in Singapore. In which country would you guess that more new companies are started each year?

Explanation / Answer

Ans: Singapore

Explanation: In singapore, the cost of registering a business is less. saving, investment and productivity is more.Taxation is less burdensome, etc. Due to which new firms will be attracted to start business in Singapore.

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