Resource Allocation, Structural Change, and the Dynamics of Manufacturing Productivity in Indonesia

Chih Hai Yang, Chao Jing Yang, Chung Yueh Chiu, Hsuan Yu Lin

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

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.

Original languageEnglish
Pages (from-to)297-327
Number of pages31
JournalDeveloping Economies
Volume56
Issue number4
DOIs
StatePublished - Dec 2018

Keywords

  • Indonesia
  • Productivity
  • Resource allocation
  • Structural bonus

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