IDEAS home Printed from https://ideas.repec.org/a/taf/applec/v43y2009i6p663-672.html
   My bibliography  Save this article

Technical efficiency and productivity analysis in Indonesian provincial economies

Author

Listed:
  • Heru Margono
  • Subhash Sharma
  • Kevin Sylwester
  • Usama Al-Qalawi

Abstract

This article estimates inefficiency and Total Factor Productivity (TFP) across Indonesian provinces from 1993 to 2000. Indonesia is a large emerging market economy, but provinces within the country (due to the island structure of the country) are more distinct from one another compared to other countries. We use a stochastic frontier methodology to estimate inefficiency and TFP. We find that TFP fell by an average rate of 7.5% across provinces due to the decrease in technical efficiency. In fact, the majority of output growth within Indonesia is explained by the accumulation of inputs. In this sense, economic growth within Indonesia does not appear to be sustainable without reversing these trends.

Suggested Citation

  • Heru Margono & Subhash Sharma & Kevin Sylwester & Usama Al-Qalawi, 2009. "Technical efficiency and productivity analysis in Indonesian provincial economies," Applied Economics, Taylor & Francis Journals, vol. 43(6), pages 663-672.
    • Handle: RePEc:taf:applec:v:43:y:2009:i:6:p:663-672
    DOI: 10.1080/00036840802599834
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840802599834
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/00036840802599834?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Ray, Subhash C & Desli, Evangelia, 1997. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries: Comment," American Economic Review, American Economic Association, vol. 87(5), pages 1033-1039, December.
    2. Shandre Mugan Thangavelu & Gulasekaran Rajaguru, 2004. "Is there an export or import-led productivity growth in rapidly developing Asian countries? a multivariate VAR analysis," Applied Economics, Taylor & Francis Journals, vol. 36(10), pages 1083-1093.
    3. Wu, Yanrui, 2000. "Is China's economic growth sustainable? A productivity analysis," China Economic Review, Elsevier, vol. 11(3), pages 278-296.
    4. Jaume Puig‐Junoy, 2001. "Technical Inefficiency and Public Capital in U.S. States: A Stochastic Frontier Approach," Journal of Regional Science, Wiley Blackwell, vol. 41(1), pages 75-96, February.
    5. K.P. Kalirajan & M.B. Obwona & S. Zhao, 1996. "A Decomposition of Total Factor Productivity Growth: The Case of Chinese Agricultural Growth before and after Reforms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 331-338.
    6. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-444, June.
    7. Chien-Chung Nieh, 2002. "The effect of the Asian financial crisis on the relationships among open macroeconomic factors for Asian countries," Applied Economics, Taylor & Francis Journals, vol. 34(4), pages 491-502.
    8. Rubiana Chamarbagwala & Sunder Ramaswamy & Phanindra Wunnava, 2000. "The role of foreign capital in domestic manufacturing productivity: empirical evidence from Asian economies," Applied Economics, Taylor & Francis Journals, vol. 32(4), pages 393-398.
    9. Mercedes Gumbau-Albert, 2000. "Efficiency and technical progress: sources of convergence in the Spanish regions," Applied Economics, Taylor & Francis Journals, vol. 32(4), pages 467-478.
    10. Koop, Gary & Osiewalski, Jacek & Steel, Mark F J, 2000. "A Stochastic Frontier Analysis of Output Level and Growth in Poland and Western Economies," Economic Change and Restructuring, Springer, vol. 33(3), pages 185-202.
    11. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-332.
    12. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
    13. Sangho Kim & Young Hoon Lee, 2006. "The productivity debate of East Asia revisited: a stochastic frontier approach," Applied Economics, Taylor & Francis Journals, vol. 38(14), pages 1697-1706.
    14. Mercedes Gumbau Albert, 1998. "Regional technical efficiency: a stochastic frontier approach," Applied Economics Letters, Taylor & Francis Journals, vol. 5(11), pages 723-726.
    15. Jondrow, James & Knox Lovell, C. A. & Materov, Ivan S. & Schmidt, Peter, 1982. "On the estimation of technical inefficiency in the stochastic frontier production function model," Journal of Econometrics, Elsevier, vol. 19(2-3), pages 233-238, August.
    16. Patricia E. Beeson & Steven Husted, 1986. "Patterns and determinants of inefficiency in state manufacturing," Working Papers (Old Series) 8603, Federal Reserve Bank of Cleveland.
    17. Battese, George E. & Coelli, Tim J., 1988. "Prediction of firm-level technical efficiencies with a generalized frontier production function and panel data," Journal of Econometrics, Elsevier, vol. 38(3), pages 387-399, July.
    18. Gregory Brock, 2001. "An Econometric Look at Inefficiency Among U.S. States, 1977-1986," The Review of Regional Studies, Southern Regional Science Association, vol. 31(1), pages 95-107, Summer.
    19. Alwyn Young, 1995. "The Tyranny of Numbers: Confronting the Statistical Realities of the East Asian Growth Experience," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 641-680.
    20. Lee C. Adkins & Ronald L. Moomaw & Andreas Savvides, 2002. "Institutions, Freedom, and Technical Efficiency," Southern Economic Journal, John Wiley & Sons, vol. 69(1), pages 92-108, July.
    21. M. Renuka & K. P. Kalirajan, 1999. "On measuring total factor productivity growth in Singapore's manufacturing industries," Applied Economics Letters, Taylor & Francis Journals, vol. 6(5), pages 295-298.
    22. Piesse, Jenifer & Thirtle, Colin, 2000. "A Stochastic Frontier Approach to Firm Level Efficiency, Technological Change, and Productivity during the Early Transition in Hungary," Journal of Comparative Economics, Elsevier, vol. 28(3), pages 473-501, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sharma, Subhash C. & Sylwester, Kevin & Margono, Heru, 2007. "Decomposition of total factor productivity growth in U.S. states," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(2), pages 215-241, May.
    2. Farsi, Mehdi & Filippini, Massimo, 2009. "An analysis of cost efficiency in Swiss multi-utilities," Energy Economics, Elsevier, vol. 31(2), pages 306-315, March.
    3. Russ Kashian & Nicholas Lovett & Yuhan Xue, 2020. "Has the affordable care act affected health care efficiency?," Journal of Regulatory Economics, Springer, vol. 58(2), pages 193-233, December.
    4. Marco Fioramanti, 2009. "Estimation and Decomposition of Total Factor Productivity Growth in the EU Manufacturing Sector: a Stochastic Frontier Approach," ISAE Working Papers 114, ISTAT - Italian National Institute of Statistics - (Rome, ITALY).
    5. Quang Nguyen & Sean Pascoe & Louisa Coglan & Son Nghiem, 2021. "The sensitivity of efficiency scores to input and other choices in stochastic frontier analysis: an empirical investigation," Journal of Productivity Analysis, Springer, vol. 55(1), pages 31-40, February.
    6. Ali M. Oumer & Amin Mugera & Michael Burton & Atakelty Hailu, 2022. "Technical efficiency and firm heterogeneity in stochastic frontier models: application to smallholder maize farms in Ethiopia," Journal of Productivity Analysis, Springer, vol. 57(2), pages 213-241, April.
    7. Lin, Bin & Wang, Xiaoxi & Jin, Songqing & Yang, Wanjiang & Li, Houjian, 2022. "Impacts of cooperative membership on rice productivity: Evidence from China," World Development, Elsevier, vol. 150(C).
    8. Mai, Nhat Chi, 2015. "Efficiency of the banking system in Vietnam under financial liberalization," OSF Preprints qsf6d, Center for Open Science.
    9. Wong Mei Foong & Tan Hui Boon & Lee Yoong Hon, 2014. "Efficiency and Productivity Gains in Knowledge-Based Production: The Case of East Asian Economies," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 122-143.
    10. MAIMOUNA DIAKITE & Jean-François BRUN, 2016. "Tax Potential and Tax Effort: An Empirical Estimation for Non-Resource Tax Revenue and VAT’s Revenue," EcoMod2016 9537, EcoMod.
    11. Dairo Estrada & Poldy Osorio, 2004. "Effects of Financial Capital on Colombian Banking Efficiency," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 22(47), pages 162-201, December.
    12. Florian Dorn, 2021. "Elections and Government Efficiency," ifo Working Paper Series 363, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    13. Y. Wu, 1997. "Productivity & Efficiency: Evidence from the Chinese regional economies," Economics Discussion / Working Papers 97-18, The University of Western Australia, Department of Economics.
    14. Wu, Yanrui, 2000. "Is China's economic growth sustainable? A productivity analysis," China Economic Review, Elsevier, vol. 11(3), pages 278-296.
    15. Nguyen, Hoa-Thi-Minh & Do, Huong & Kompas, Tom, 2021. "Economic efficiency versus social equity: The productivity challenge for rice production in a ‘greying’ rural Vietnam," World Development, Elsevier, vol. 148(C).
    16. Young Hoon Lee, 2009. "Frontier Models and their Application to the Sports Industry," Working Papers 0903, Nam Duck-Woo Economic Research Institute, Sogang University (Former Research Institute for Market Economy), revised 2009.
    17. Marco FIORAMANTI, 2010. "Estimation And Decomposition Of Total Factor Productivity Growth In The Eu Manufacturing Sector: A Long Run Perspective," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 5(3(13)/Fal), pages 217-230.
    18. Amer Ait Sidhoum & K Hervé Dakpo & Laure Latruffe, 2022. "Trade-offs between economic, environmental and social sustainability on farms using a latent class frontier efficiency model: Evidence for Spanish crop farms," PLOS ONE, Public Library of Science, vol. 17(1), pages 1-17, January.
    19. Manlagnit, Maria Chelo V., 2015. "Basel regulations and banks’ efficiency: The case of the Philippines," Journal of Asian Economics, Elsevier, vol. 39(C), pages 72-85.
    20. Belotti, Federico & Ilardi, Giuseppe, 2018. "Consistent inference in fixed-effects stochastic frontier models," Journal of Econometrics, Elsevier, vol. 202(2), pages 161-177.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:43:y:2009:i:6:p:663-672. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEC20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.