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Analysis of the Effect of Regional Characteristics on Technical Efficiency: (Case Study on Light Manufacturing Industry in Indonesia 1995 – 1997)


  • Muhamad Purnagunawan

    () (Department of Economics, Padjadjaran University)


This paper attempts to investigate the level of relative technical efficiency, productivity and the role of regional characteristics on technical efficiency performance of firms in Indonesian’s light manufacturing industry. Data Envelopment Analysis, Malmquist Productivity Index and regression analysis are used on BPS’s secondary data of 3364 establishment during 1995-1997. Empirical results show that average technical efficiency had been low and the decline of technical efficiency was occurred. Considerable productivity growth was found in most of industrial sectors, but it was mainly accomplished through technical progress rather than efficiency improvement. Regression analyses indicate that the level of technical efficiency was influenced by regional characteristics, where industrial specialization, competition and urban size had positive impacts. The present of industrial knowledge spillovers between industries and from foreign direct investment was not supported by the empirical estimation. Empirical results also shows that foreign owned firms dan medium scale firms were more likely to have higher level of relative technical efficiency.

Suggested Citation

  • Muhamad Purnagunawan, 2003. "Analysis of the Effect of Regional Characteristics on Technical Efficiency: (Case Study on Light Manufacturing Industry in Indonesia 1995 – 1997)," Working Papers in Economics and Development Studies (WoPEDS) 200309, Department of Economics, Padjadjaran University, revised Jul 2003.
  • Handle: RePEc:unp:wpaper:200309

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    More about this item


    technical efficiency; Indonesia;

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth


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