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

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  • Marcel Timmer

Abstract

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.

Suggested Citation

  • Marcel Timmer, 1999. "Indonesia's Ascent on the Technology Ladder: Capital Stock and Total Factor Productivity in Indonesian Manufacturing, 1975-95," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 35(1), pages 75-97.
  • Handle: RePEc:taf:bindes:v:35:y:1999:i:1:p:75-97 DOI: 10.1080/00074919912331337497
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    1. repec:ucp:bknber:9780226304557 is not listed on IDEAS
    2. Robert J. Gordon, 1990. "The Measurement of Durable Goods Prices," NBER Books, National Bureau of Economic Research, Inc, number gord90-1.
    3. 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.
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    Cited by:

    1. Ester Gomes da Silva, 2009. "Capital services estimates in Portuguese industries, 1977-2003," FEP Working Papers 313, Universidade do Porto, Faculdade de Economia do Porto.
    2. Peter Warr, 2006. "Productivity Growth in Thailand and Indonesia: How Agriculture Contributes to Economic Growth," Working Papers in Economics and Development Studies (WoPEDS) 200606, Department of Economics, Padjadjaran University, revised Feb 2006.
    3. Vial, Virginie & Hanoteau, Julien, 2010. "Corruption, Manufacturing Plant Growth, and the Asian Paradox: Indonesian Evidence," World Development, Elsevier, vol. 38(5), pages 693-705, May.
    4. Thee Kian Wie, 2005. "Policies Affecting Indonesia's Industrial Technology Development," Hi-Stat Discussion Paper Series d05-121, Institute of Economic Research, Hitotsubashi University.
    5. Ester Gomes da Silva, 2010. "Capital services estimates in Portuguese industries, 1977–2003," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 9(1), pages 35-74, April.
    6. Wang, Lili & Szirmai, Adam, 2008. "Regional Capital Inputs in Chinese Industry and Manufacturing, 1978-2003," MERIT Working Papers 028, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    7. Wang, Lili & Szirmai, Adam, 2012. "Capital inputs in the Chinese economy: Estimates for the total economy, industry and manufacturing," China Economic Review, Elsevier, vol. 23(1), pages 81-104.
    8. van der Eng, Pierre, 2010. "The sources of long-term economic growth in Indonesia, 1880-2008," Explorations in Economic History, Elsevier, vol. 47(3), pages 294-309, July.

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