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Disparities in Regional Productivity, Capital Accumulation, and Efficiency across Indonesia: A Convergence Clubs Approach

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  • Mendez-Guerra, Carlos
  • Kataoka, Mitsuhiko

Abstract

This paper studies the evolution of regional disparities in labor productivity, capital accumulation, and efficiency across Indonesian provinces over the 1990-2010 period. Through the lens of a non-linear dynamic factor model, we first test the hypothesis that all provinces would eventually converge to a common steady-state path. We reject this hypothesis and find that the provincial dynamics of labor productivity are characterized by two convergence clubs. We next evaluate the dynamics of the proximate determinants of labor productivity and find some mixed results. On the one hand, physical and human capital accumulation are characterized by four and two convergence clubs, respectively. On the other hand, efficiency is characterized by a unique convergence club. The paper concludes suggesting that based on the provincial composition of each club and the common low level of efficiency across Indonesia, considerable improvements in both capital accumulation and efficiency are still needed to reduce regional disparities and accelerate productivity growth.

Suggested Citation

  • Mendez-Guerra, Carlos & Kataoka, Mitsuhiko, 2020. "Disparities in Regional Productivity, Capital Accumulation, and Efficiency across Indonesia: A Convergence Clubs Approach," MPRA Paper 99322, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:99322
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Mitsuhiko Kataoka, 2022. "Perspiration versus inspiration: sources of national and provincial output growth in Indonesia [1990–2015] using province-level non-parametric frontier analysis," Asia-Pacific Journal of Regional Science, Springer, vol. 6(1), pages 113-139, February.
    2. Anang Budi Gunawan & Carlos Mendez & Shigeru Otsubo, 2021. "Provincial income convergence clubs in Indonesia: Identification and conditioning factors," Growth and Change, Wiley Blackwell, vol. 52(4), pages 2540-2575, December.
    3. Rio Benedicto Bire, 2021. "Mapping destination competitiveness in Indonesia’s Nusa Tenggara Timur (NTT) province: A Malmquist–data envelopment analysis approach," Regional Science Policy & Practice, Wiley Blackwell, vol. 13(3), pages 820-834, June.
    4. Harry Aginta, 2021. "Spatial dynamics of consumer price in Indonesia: convergence clubs and conditioning factors," Asia-Pacific Journal of Regional Science, Springer, vol. 5(2), pages 427-451, June.
    5. Harry Aginta, 2020. "Does the law of one price hold in 82 Indonesian cities? Evidence from club convergence approach," Economics Bulletin, AccessEcon, vol. 40(4), pages 2844-2858.

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    More about this item

    Keywords

    Regional productivity; Capital Accumulation; Efficiency; Convergence clubs; Indonesia;
    All these keywords.

    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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