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Indonesia's Ascent on the Technology Ladder: Capital Stock and Total Factor Productivity in Indonesian Manufacturing, 1975-95

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  • Marcel Timmer

Abstract

This paper presents new capital stock estimates for mium and large-scale manufacturing in Indonesia using the Perpetual Inventory Method. Capital stock grew gradually during 1975-88, at an annual rate of 7.6%, then boomed during 1989-95 at 13.6% per annum. Growth accounting shows that 60% of the rapid growth of manufacturing output during the period 1975-95 was due to capital input growth, 18% to labour input growth and the remaining 22% to total factor productivity (TFP) growth. There is no evidence of a shift of factor inputs towards more efficient industries. TFP growth averaged 3% annually in 1975-95. Performance varied greatly across industries, but the policy changes that have taken effect since 1986 have definitely been beneficial for all industries. Put in an international perspective, however, Indonesia's TFP levels show no signs of catch-up with the world frontier.

Suggested Citation

  • Marcel Timmer, 1999. "Indonesia's Ascent on the Technology Ladder: Capital Stock and Total Factor Productivity in Indonesian Manufacturing, 1975-95," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 35(1), pages 75-97.
    • Handle: RePEc:taf:bindes:v:35:y:1999:i:1:p:75-97
    DOI: 10.1080/00074919912331337497
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    1. repec:ucp:bknber:9780226304557 is not listed on IDEAS
    2. H. J. Plunkett & W. E. Morgan & J. L. Pomeroy, 1997. "Regulation of The Indonesian Cement Industry," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 33(1), pages 75-102.
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    Cited by:

    1. Mitsuhiko Kataoka, 2013. "Capital Stock Estimates by Province and Interprovincial Distribution in Indonesia," Asian Economic Journal, East Asian Economic Association, vol. 27(4), pages 409-428, December.
    2. Ester Gomes da Silva, 2010. "Capital services estimates in Portuguese industries, 1977–2003," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 9(1), pages 35-74, April.
    3. Coxhead, Ian A. & Li, Muqun, 2008. "Prospects for Skills-Based Export Growth in a Labour-Abundant, Resource-Rich Economy: Indonesia in Comparative Perspective," Staff Papers 92201, University of Wisconsin-Madison, Department of Agricultural and Applied Economics.
    4. Wang, Lili & Szirmai, Adam, 2008. "Regional Capital Inputs in Chinese Industry and Manufacturing, 1978-2003," MERIT Working Papers 2008-028, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    5. van der Eng, Pierre, 2010. "The sources of long-term economic growth in Indonesia, 1880-2008," Explorations in Economic History, Elsevier, vol. 47(3), pages 294-309, July.
    6. Kyunghoon Kim & Arriya Mungsunti & Andy Sumner & Arief Anshory Yusuf, 2020. "Structural transformation and inclusive growth: Kuznets' 'developer's dilemma' in Indonesia," WIDER Working Paper Series wp-2020-31, World Institute for Development Economic Research (UNU-WIDER).
    7. repec:dgr:rugggd:gd-99 is not listed on IDEAS
    8. Peter Warr, 2006. "Productivity Growth in Thailand and Indonesia: How Agriculture Contributes to Economic Growth," Working Papers in Economics and Development Studies (WoPEDS) 200606, Department of Economics, Padjadjaran University, revised Feb 2006.
    9. Vial, Virginie & Hanoteau, Julien, 2010. "Corruption, Manufacturing Plant Growth, and the Asian Paradox: Indonesian Evidence," World Development, Elsevier, vol. 38(5), pages 693-705, May.
    10. Thee Kian Wie, 2005. "Policies Affecting Indonesia's Industrial Technology Development," Hi-Stat Discussion Paper Series d05-121, Institute of Economic Research, Hitotsubashi University.
    11. Wang, Lili & Szirmai, Adam, 2012. "Capital inputs in the Chinese economy: Estimates for the total economy, industry and manufacturing," China Economic Review, Elsevier, vol. 23(1), pages 81-104.
    12. Chih‐Hai Yang & Chao‐Jing Yang & Chung‐Yueh Chiu & Hsuan‐Yu Lin, 2018. "Resource Allocation, Structural Change, and the Dynamics of Manufacturing Productivity in Indonesia," The Developing Economies, Institute of Developing Economies, vol. 56(4), pages 297-327, December.

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