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Total factor productivity change in Indonesia’s provincial economies for 1990–2015: Malmquist productivity index approach

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  • Mitsuhiko Kataoka

    (Rikkyo University)

Abstract

This study employs the Malmquist productivity index based on data envelopment analysis to measure and decompose total factor productivity (TFP) change into efficiency and technological change by province. Using annual observations of gross regional domestic product and factor inputs (labor, physical, and human capital) for 26 contiguous provinces, we find that over a quarter of them experienced negative TFP growth over 1990–2015 due to technological regress, which was barely offset by efficiency improvements. Three on-Java provinces—Jakarta, West Java, and East Java—contributed to national technological progress with full utilization and optimal allocation of resources at least once over the study period, except during 1995–2005, when Indonesia experienced a financial crisis and subsequent slow recoveries. Jakarta and West Java contributed in all other periods. Considering the high spatial density of urban economic activities in these three provinces, we conclude that urban agglomeration is influential for further regional technological growth in Indonesia.

Suggested Citation

  • Mitsuhiko Kataoka, 2020. "Total factor productivity change in Indonesia’s provincial economies for 1990–2015: Malmquist productivity index approach," Letters in Spatial and Resource Sciences, Springer, vol. 13(3), pages 233-243, December.
    • Handle: RePEc:spr:lsprsc:v:13:y:2020:i:3:d:10.1007_s12076-020-00256-z
    DOI: 10.1007/s12076-020-00256-z
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    More about this item

    Keywords

    Malmquist productivity index; Data envelopment analysis; Total factor productivity; Region; Indonesia;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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