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New Estimates Of Total Factor Productivity Growth In Indonesian Manufacturing

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  • Virginie Vial

Abstract

This paper estimates new elasticities of value added with respect to labour and capital in Indonesian manufacturing, controlling for the simultaneity problem that potentially exists between the choice of input levels and a productivity shock (such as an increase in productivity due to new production processes), for plant exit, and for quasi-constant unobservable plant characteristics. It does so by applying the Levinsohn and Petrin (2003) production function estimator to plant-level value added, fixed assets, labour, and electricity consumption data over the period 1988-95. This methodology allows us to revisit the previously used growth accounting based elasticities, and thereby improves total factor productivity (TFP) estimates. The results show that, in the period under study, aggregate TFP growth in Indonesian manufacturing was higher than had previously been estimated.

Suggested Citation

  • Virginie Vial, 2006. "New Estimates Of Total Factor Productivity Growth In Indonesian Manufacturing," Bulletin of Indonesian Economic Studies, Taylor & Francis Journals, vol. 42(3), pages 357-369.
  • Handle: RePEc:taf:bindes:v:42:y:2006:i:3:p:357-369
    DOI: 10.1080/00074910601053227
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    References listed on IDEAS

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    1. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    2. Okamoto, Yumiko & Sjöholm, Fredrik, 1999. "Protection and the Dynamics of Productivity Growth: The Case of Automotive Industries in Indonesia," SSE/EFI Working Paper Series in Economics and Finance 324, Stockholm School of Economics.
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    Cited by:

    1. Dyah Wulan Sari & Noor Aini Khalifah & Suyanto Suyanto, 2016. "The spillover effects of foreign direct investment on the firms’ productivity performances," Journal of Productivity Analysis, Springer, vol. 46(2), pages 199-233, December.
    2. Suyanto, & Salim, Ruhul & Bloch, Harry, 2014. "Which firms benefit from foreign direct investment? Empirical evidence from Indonesian manufacturing," Journal of Asian Economics, Elsevier, vol. 33(C), pages 16-29.
    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. ., 2013. "Total Factor Productivity and Economic Growth in Indonesia," Chapters,in: World Economic Performance, chapter 8, pages 193-226 Edward Elgar Publishing.
    5. Suyanto & Salim, Ruhul A. & Bloch, Harry, 2009. "Does Foreign Direct Investment Lead to Productivity Spillovers? Firm Level Evidence from Indonesia," World Development, Elsevier, vol. 37(12), pages 1861-1876, December.
    6. Pierre van der Eng, 2008. "The sources of long-term economic growth in Indonesia, 1880-2007," ANU Working Papers in Economics and Econometrics 2008-499, Australian National University, College of Business and Economics, School of Economics.
    7. 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.
    8. Julien Hanoteau & Virginie Vial, 2014. "Grease or sand the wheel? The effects of individual bribe payments on aggregate productivity growth," EcoMod2014 6685, EcoMod.
    9. Ghosh, Saibal, 2013. "Do economic reforms matter for manufacturing productivity? Evidence from the Indian experience," Economic Modelling, Elsevier, vol. 31(C), pages 723-733.
    10. Matthias Meier & Ariel Mecikovsky & Christian Bayer, 2014. "Dynamics of Factor Productivity Dispersions," 2014 Meeting Papers 719, Society for Economic Dynamics.

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