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Revealing the Dual Dynamics: Transient and Persistent Efficiencies of the Indonesian Provincial Economies

Author

Listed:
  • Mohammad Zeqi Yasin

    (Department of Economics, University of Jember, East Java, Indonesia)

  • Fichrie Fachrowi Adli

    (Department of Economics, Universitas Airlangga, East Java, Indonesia)

Abstract

We examine the decomposition of technical efficiency components into transient and persistent horizons applied to the 33 provincial economies in Indonesia. Focusing on the post-decentralization era in 2002–2022, we employ Stochastic Frontier Analysis to gauge efficiency dynamics for time-variant and time-invariant evolution. We reveal that the persistent inefficiencies outweigh transient ones, implying the persistent inefficient behavior of Indonesian provinces. We also capture that East Nusa Tenggara and several provinces in Eastern Indonesia show the most lagged-behind in terms of persistent inefficiency severity, suggesting necessity of structural changes through more strategic and specific development models beyond mere heterogeneous input reallocation.

Suggested Citation

  • Mohammad Zeqi Yasin & Fichrie Fachrowi Adli, 2024. "Revealing the Dual Dynamics: Transient and Persistent Efficiencies of the Indonesian Provincial Economies," Economics and Finance in Indonesia, Faculty of Economics and Business, University of Indonesia, vol. 70, pages 113-131, December.
    • Handle: RePEc:lpe:efijnl:202408
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    More about this item

    Keywords

    persistent inefficiency; transient inefficiency; Indonesian provinces; regional development;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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