IDEAS home Printed from https://ideas.repec.org/a/eee/telpol/v38y2014i3p248-263.html
   My bibliography  Save this article

Decomposition analysis of the telecommunications sector in Indonesia: What does the cellular era shed light on?

Author

Listed:
  • Rohman, Ibrahim Kholilul
  • Bohlin, Erik

Abstract

Indonesia is currently enjoying rapid development in the telecommunications sector despite the economy having been heavily dependent for almost four decades on the two largest sectors: the manufacturing industry and trade. The telecommunications sector has played an important role in stimulating economic growth in the country during the last few years, with an annual growth rate higher than that of other sectors. This contribution is supported to a great extent by the rapid diffusion of telephony, in particular cellular telephony, as the number of subscribers increased from just 2.1 million in 1999 to 170 million in 2011. Previous studies investigating the impact of the telecommunications sector on the economy aggregate the impact of the sectors on Gross Domestic Product (GDP) without further scrutiny of what sources of growth telecommunications has contributed. Hence, an interesting question arises as to whether the achievement of cellular diffusion is also followed by structural change in the telecommunications sector. That said, this study aims to decompose the output of telecommunications into several sources of growth: domestic final demand, export effect, import substitution effect and technological coefficient effect. A particular interest in this study is to compare the source of growth concerning domestic final demand and the technological coefficient effect. The main tool for analysis in this study is the Input–Output (IO) method, while the time series of the investigation covers the period 1975–2008, allowing comparison of structural changes in the telecommunications sector between the pre- and post-cellular eras. The study found that the coefficient multiplier of the telecommunications sector, which was approximately 1.8 during the 1980s, had decreased to only 1.3 by the end of 2008. Consequently, the final demand from the telecommunications sector contributed less to economic output in the late 2000s compared to the impact in the 1980. Moreover, the cellular era that started in the early 2000s also brought about a trend of changes in telecommunications output. While final demand remains very dominant, the technological coefficient effect has diminished as the source of telecommunications output. This finding indicates a lower ability of the telecommunications sector to build an inter-industry relationship with other sectors. A possible explanation for this result is the cellular uses which are much less related to business activities than that of fixed telephony dating back to the 1970s in Indonesia.

Suggested Citation

  • Rohman, Ibrahim Kholilul & Bohlin, Erik, 2014. "Decomposition analysis of the telecommunications sector in Indonesia: What does the cellular era shed light on?," Telecommunications Policy, Elsevier, vol. 38(3), pages 248-263.
  • Handle: RePEc:eee:telpol:v:38:y:2014:i:3:p:248-263
    DOI: 10.1016/j.telpol.2013.10.006
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S030859611300178X
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Lars-Hendrik Roller & Leonard Waverman, 2001. "Telecommunications Infrastructure and Economic Development: A Simultaneous Approach," American Economic Review, American Economic Association, vol. 91(4), pages 909-923, September.
    2. Sikhanwita Roy & Tuhin Das & Debesh Chakraborty, 2002. "A Study on the Indian Information Sector: An Experiment with Input-Output Techniques," Economic Systems Research, Taylor & Francis Journals, vol. 14(2), pages 107-129, June.
    3. Horioka, Charles Yuji, 2006. "The causes of Japan's `lost decade': The role of household consumption," Japan and the World Economy, Elsevier, vol. 18(4), pages 378-400, December.
    4. Skolka, Jiri, 1989. "Input-output structural decomposition analysis for Austria," Journal of Policy Modeling, Elsevier, vol. 11(1), pages 45-66.
    5. M. Ishaq Nadiri & Banani Nandi, 1999. "Technical Change, Markup, Divestiture, And Productivity Growth In The U.S. Telecommunications Industry," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 488-498, August.
    6. Paul-Antoine Beretti & Gilbert Cette, 2009. "Indirect ICT investment," Applied Economics Letters, Taylor & Francis Journals, vol. 16(17), pages 1713-1716.
    7. Erik Dietzenbacher & Bart Los, 1998. "Structural Decomposition Techniques: Sense and Sensitivity," Economic Systems Research, Taylor & Francis Journals, vol. 10(4), pages 307-324.
    8. Aying Liu, 1998. "Sources of Structural Change and Output Growth of China's Economy: 1987-92," Economic Change and Restructuring, Springer, vol. 31(2), pages 95-116, May.
    9. Seyfang, Gill & Longhurst, Noel, 2013. "Growing green money? Mapping community currencies for sustainable development," Ecological Economics, Elsevier, vol. 86(C), pages 65-77.
    10. Houssa, Romain, 2013. "Uncertainty about welfare effects of consumption fluctuations," European Economic Review, Elsevier, vol. 59(C), pages 35-62.
    11. Paul B. Siegel & Jeffrey Alwang & Thomas G. Johnson, 1995. "Decomposing Sources of Regional Growth with an Input-output Model: A Framework for Policy Analysis," International Regional Science Review, , vol. 18(3), pages 331-353, July.
    12. Toh Mun Heng & Sandre M. Thangavelu, 2006. "Singapore information sector : a study using input-output table," Development Economics Working Papers 21817, East Asian Bureau of Economic Research.
    13. Mohamad Fulazzaky & Hilman Akil, 2009. "Development of Data and Information Centre System to Improve Water Resources Management in Indonesia," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 23(6), pages 1055-1066, April.
    14. George Korres, 1996. "Sources of structural change: an input-output decomposition analysis for Greece," Applied Economics Letters, Taylor & Francis Journals, vol. 3(11), pages 707-710.
    15. Vicente, Maria Rosalia & Lopez, Ana Jesus, 2006. "Patterns of ICT diffusion across the European Union," Economics Letters, Elsevier, vol. 93(1), pages 45-51, October.
    16. Cronin, Francis J. & Parker, Edwin B. & Colleran, Elisabeth K. & Gold, Mark A., 1991. "Telecommunications infrastructure and economic growth : An analysis of causality," Telecommunications Policy, Elsevier, vol. 15(6), pages 529-535, December.
    17. Ercin, A. Ertug & Mekonnen, Mesfin M. & Hoekstra, Arjen Y., 2013. "Sustainability of national consumption from a water resources perspective: The case study for France," Ecological Economics, Elsevier, vol. 88(C), pages 133-147.
    18. Madden, Gary & Savage, Scott J., 1998. "CEE telecommunications investment and economic growth," Information Economics and Policy, Elsevier, vol. 10(2), pages 173-195, June.
    19. Wong, Poh-Kam, 2002. "ICT production and diffusion in Asia Digital dividends or digital divide?," Information Economics and Policy, Elsevier, vol. 14(2), pages 167-187, June.
    20. Roy Chun Lee & Christopher Findlay, 2005. "Telecommunications reform in Indonesia: Achievements and challenges," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 41(3), pages 341-365.
    21. Robert Inklaar & Mary O'Mahony & Marcel Timmer, 2005. "ICT AND EUROPE's PRODUCTIVITY PERFORMANCE: INDUSTRY-LEVEL GROWTH ACCOUNT COMPARISONS WITH THE UNITED STATES," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 51(4), pages 505-536, December.
    22. Maryam Farhadi Kooshki Author_Email: farhadim58@gmail.com & Rahmah Ismail, 2011. "The Impact Of Information And Communication Technology Investment Externalities On Economic Growth In Newly Industrialized Countries," 2nd International Conference on Business and Economic Research (2nd ICBER 2011) Proceeding 2011-251, Conference Master Resources.
    23. Farkhanda Shamim, 2007. "The ICT environment, financial sector and economic growth: a cross-country analysis," Journal of Economic Studies, Emerald Group Publishing, vol. 34(4), pages 352-370, September.
    24. B. Andreosso-O'Callaghan & Guoqiang Yue, 2002. "Sources of output change in China: 1987-1997: application of a structural decomposition analysis," Applied Economics, Taylor & Francis Journals, vol. 34(17), pages 2227-2237.
    25. Norton, Seth W, 1992. "Transaction Costs, Telecommunications, and the Microeconomics of Macroeconomic Growth," Economic Development and Cultural Change, University of Chicago Press, vol. 41(1), pages 175-196, October.
    26. Yang, Ling & Lahr, Michael L., 2010. "Sources of Chinese labor productivity growth: A structural decomposition analysis, 1987-2005," China Economic Review, Elsevier, vol. 21(4), pages 557-570, December.
    27. Bekhet, Hussain Ali, 2013. "Assessing structural changes in the Malaysian economy: I–O approach," Economic Modelling, Elsevier, vol. 30(C), pages 126-135.
    28. Toh Mun Heng & Shandre M. Thangavelu, 2006. "Singapore Information Sector: A Study Using Input-Output Table," SCAPE Policy Research Working Paper Series 0615, National University of Singapore, Department of Economics, SCAPE.
    29. Qi, Li & Prime, Penelope B., 2009. "Market reforms and consumption puzzles in China," China Economic Review, Elsevier, vol. 20(3), pages 388-401, September.
    30. Jiansuo Pei & Jan Oosterhaven & Erik Dietzenbacher, 2012. "How Much Do Exports Contribute To China'S Income Growth?," Economic Systems Research, Taylor & Francis Journals, vol. 24(3), pages 275-297, January.
    31. repec:eee:jouret:v:89:y:2013:i:1:p:44-61 is not listed on IDEAS
    32. Sang H. Lee & John Levendis & Luis Gutierrez, 2012. "Telecommunications and economic growth: an empirical analysis of sub-Saharan Africa," Applied Economics, Taylor & Francis Journals, vol. 44(4), pages 461-469, February.
    33. Azmat Gani & Michael D. Clemes, 2006. "Information and communications technology: a non-income influence on economic well being," International Journal of Social Economics, Emerald Group Publishing, vol. 33(9), pages 649-663, September.
    34. Richard Hindls & Stanislava Hronová, 2012. "Odraz ekonomického vývoje vybraných zemí ve struktuře výdajů na konečnou spotřebu
      [Reflection of Economic Development of Selected Countries in the Structure of Final Consumption Expenditure]
      ," Politická ekonomie, University of Economics, Prague, vol. 2012(4), pages 425-441.
    35. Xiaoli Han & TK. Lakshmanan, 1994. "Structural Changes and Energy Consumption in the Japanese Economy 1975-95: An Input-Output Analysis," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 165-188.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:telpol:v:38:y:2014:i:3:p:248-263. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/30471/description#description .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.