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Resource Allocation, Structural Change, and the Dynamics of Manufacturing Productivity in Indonesia
Author(s) -
Yang ChihHai,
Yang ChaoJing,
Chiu ChungYueh,
Lin HsuanYu
Publication year - 2018
Publication title -
the developing economies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.305
H-Index - 30
eISSN - 1746-1049
pISSN - 0012-1533
DOI - 10.1111/deve.12185
Subject(s) - total factor productivity , productivity , indonesian , economics , manufacturing sector , manufacturing , panel data , order (exchange) , multifactor productivity , financial crisis , industrial organization , labour economics , business , econometrics , macroeconomics , finance , philosophy , linguistics , marketing
This paper analyzes productivity growth and its sources in the Indonesian manufacturing sector during the post‐Asian financial crisis period. Based on a plant‐level panel dataset over the period 2001–9, we find meager total factor productivity (TFP) growth in this country's manufacturing industries, merely achieving average annual growth of 0.03%, while TFP growth varies significantly across industries. Further decomposition suggests the need to effectively allocate resources across industries in order to promote aggregate productivity. Moreover, aggregate productivity growth coming from the total reallocation effect remains quite low, lending no support to the structural‐bonus hypothesis. Overall, TFP growth is mainly contributed by incumbents firms, whereas the contribution by firm mobility was larger in some years.