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Technical efficiency and embodied technical change in the Indonesian pulp and paper industry

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  • Michiel Van Dijk

    (Eindhoven Centre for Innovation Studies (ECIS), Eindhoven University of Technology, The Netherlands)

  • Adam Szirmai

    (Eindhoven Centre for Innovation Studies (ECIS), Eindhoven University of Technology, The Netherlands)

Abstract

In this paper the dynamics of technological change and technical efficiency in the Indonesian pulp and paper industry are analysed. The industry is characterised by rapid growth of output and capacity, with some mills investing heavily in state-of-the-art machinery after 1984. Using stochastic frontier analysis, we distinguish between technological advances of best practice mills and the rate of technological inefficiency. We use a newly constructed micro-level dataset describing the complete population of Indonesian paper mills and paper machines from 1975 to 1997. We find an increasing divergence in technical efficiency over time, indicating that most plants have been not able to keep up with the technological leaders in the industry. Several of the plants operating the latest technologies have lower levels of efficiency than mills operating more outdated equipment. These outcomes qualify the common understanding of dualistic economic structures in developing countries, composed of less efficient traditional and more efficient modern capital intensive establishments. Copyright © 2006 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/jid.1189
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Journal of International Development.

Volume (Year): 18 (2006)
Issue (Month): 2 ()
Pages: 163-178

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Handle: RePEc:wly:jintdv:v:18:y:2006:i:2:p:163-178

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Web page: http://www3.interscience.wiley.com/journal/5102/home

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  1. Angela Lusigi & Colin Thirtle, 1997. "Total Factor Productivity And The Effects Of R&D In African Agriculture," Journal of International Development, John Wiley & Sons, Ltd., vol. 9(4), pages 529-538.
  2. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-32.
  3. Dijk van, M., 2003. "Industry Evolution in Developing Countries: the Indonesian Pulp and Paper Industry," Working Papers 03.02, Eindhoven Center for Innovation Studies.
  4. Mario Cimoli & Jorge Katz, 2003. "Structural reforms, technological gaps and economic development: a Latin American perspective," Industrial and Corporate Change, Oxford University Press, vol. 12(2), pages 387-411, April.
  5. Martine AUDIBERT, 1996. "Technical inefficiency effects among paddy farmers at the 'Office du Niger', Mali, West Africa," Working Papers 199613, CERDI.
  6. A. Szirmai & M. P. Timmer & R. van der Kamp, 2002. "Measuring Embodies Technological Change in Indonesian Textiles: The Core-Machinery Approach," Journal of Development Studies, Taylor & Francis Journals, vol. 39(2), pages 155-177.
  7. Dijk van, M. & Szirmai, A., 2005. "Industrial Policy and Technology Diffusion: Evidence from Paper Making Machinery in Indonesia," Working Papers 05.15, Eindhoven Center for Innovation Studies.
  8. Eric Ramstetter, 1999. "Trade Propensities and Foreign Ownership Shares in Indonesian Manufacturing," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 35(2), pages 43-66.
  9. H. Aswicahyono & H. Hill, 2002. "'Perspiration' vs 'Inspiration' in Asian Industrialisation: Indonesia Before the Crisis," Journal of Development Studies, Taylor & Francis Journals, vol. 38(3), pages 138-163.
  10. Huggett, Mark & Ospina, Sandra, 2001. "Does productivity growth fall after the adoption of new technology?," Journal of Monetary Economics, Elsevier, vol. 48(1), pages 173-195, August.
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Cited by:
  1. van Dijk, Michiel & Szirmai, Adam, 2006. "Industrial Policy and Technology Diffusion: Evidence from Paper Making Machinery in Indonesia," World Development, Elsevier, vol. 34(12), pages 2137-2152, December.
  2. Michiel Van Dijk & Adam Szirmai, 2005. "Catch Up at the Micro-Level: Evidence from an Industry Case Study Using Manufacturing Census Data," DEGIT Conference Papers c010_038, DEGIT, Dynamics, Economic Growth, and International Trade.
  3. Szirmai, Adam & Van Dijk, Michiel, 2007. "The Micro-Dynamics of Catch Up in Indonesian Paper Manufacturing: An International Comparison of Plant-Level Performance," MERIT Working Papers 010, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  4. Qi Li & Jeffrey Scott Racine, 2006. "Nonparametric Econometrics: Theory and Practice," Economics Books, Princeton University Press, edition 1, volume 1, number 8355.

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