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Indonesia's Ascent on the Technology Ladder: Capital Stock and Total Factor Productivity in Indonesian Manufacturing, 1975-95

  • Marcel Timmer

This paper presents new capital stock estimates for mium and large-scale manufacturing in Indonesia using the Perpetual Inventory Method. Capital stock grew gradually during 1975-88, at an annual rate of 7.6%, then boomed during 1989-95 at 13.6% per annum. Growth accounting shows that 60% of the rapid growth of manufacturing output during the period 1975-95 was due to capital input growth, 18% to labour input growth and the remaining 22% to total factor productivity (TFP) growth. There is no evidence of a shift of factor inputs towards more efficient industries. TFP growth averaged 3% annually in 1975-95. Performance varied greatly across industries, but the policy changes that have taken effect since 1986 have definitely been beneficial for all industries. Put in an international perspective, however, Indonesia's TFP levels show no signs of catch-up with the world frontier.

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Article provided by Taylor & Francis Journals in its journal Bulletin of Indonesian Economic Studies.

Volume (Year): 35 (1999)
Issue (Month): 1 ()
Pages: 75-97

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Handle: RePEc:taf:bindes:v:35:y:1999:i:1:p:75-97
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  1. Gordon, Robert J., 1990. "The Measurement of Durable Goods Prices," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226304557, March.
  2. Dale W. Jorgenson, 1991. "Productivity and Economic Growth," NBER Chapters, in: Fifty Years of Economic Measurement: The Jubilee of the Conference on Research in Income and Wealth, pages 19-118 National Bureau of Economic Research, Inc.
  3. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1, November.
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