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Trade liberalization and technical efficiency in the Indonesian chemicals industry

Author

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  • Bernadetta Dwi Suatmi
  • Harry Bloch
  • Ruhul Salim

Abstract

This article examines the impact of trade reform on technical efficiency on the Indonesian chemicals industry using firm-level panel data. The effects of trade reform on technical efficiency are analysed using a stochastic frontier approach. Two variables represent trade reform in this model: effective rate of protection (ERP) and import ratio (IMP). The findings of the present study suggest that both trade reform variables have significant effects on technical efficiency. The coefficient of ERP has a positive sign and is statistically significant, which means that an increase in ERP increases the inefficiency (or decreases the technical efficiency) of firms in the chemicals industry. The coefficient of IMP is negative and statistically significant, which represents the negative impact of IMP on technical inefficiency (or positive on technical efficiency). Thus, trade reform, a reduction in ERP or an increase in IMP, has an unambiguously positive effect on technical efficiency in the Indonesian chemicals industry.

Suggested Citation

  • Bernadetta Dwi Suatmi & Harry Bloch & Ruhul Salim, 2017. "Trade liberalization and technical efficiency in the Indonesian chemicals industry," Applied Economics, Taylor & Francis Journals, vol. 49(44), pages 4428-4439, September.
    • Handle: RePEc:taf:applec:v:49:y:2017:i:44:p:4428-4439
    DOI: 10.1080/00036846.2017.1282150
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    Cited by:

    1. Hussein Al-Zyoud & Asheref Illiyan & Vasim Akram, 2022. "Impact of Economic Openness on Macro Technical Efficiency in South Asia," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 28(3), pages 91-103, November.
    2. Mohammad Zeqi Yasin, 2020. "Productivity: The Growth Accounting and The Stochastic Frontier Approach," Economics Bulletin, AccessEcon, vol. 40(4), pages 3020-3032.

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