Technical efficiency and productivity analysis in Indonesian provincial economies

Heru Margono, Subhash Sharma, Kevin Sylwester and Usama Al-Qalawi
Authors registered in the RePEc Author Service: Usama R. alqalawi

Applied Economics, 2009, vol. 43, issue 6, 663-672

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.

Date: 2009
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DOI: 10.1080/00036840802599834

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