1. Home
  2. Vol 17, No 1 (2022)
  3. Rostiana

Total Factor Productivity Calculation of the Indonesian Micro and Small Scale Manufacturing Industry

Endang Rostiana(1*), Horas Djulius(2), Gugum Mukdas Sudarjah(3)
(*) Corresponding Author

DOI: 10.24269/ekuilibrium.v17i1.2022.pp54-63


Abstract


The purpose of this research is to determine the total factor productivity (TFP) of Indonesia's micro and small-scale manufacturing industries. The production function estimation approach established by Levinsohn-Petrin as the basis for computing TFP is employed in this study, with value added as the dependent variable and the value of labor costs and capital value proxied by the value of investment as the independent variables. This study uses secondary data from the Central Statistics Agency (BPS), which includes 23 sub-sectors of Indonesia's micro and small scale manufacturing industries that are included in the 2-digit ISIC, with the exception of the ISIC code 19 sub-sector, and covers the years 2010 to 2019, excluding 2016. The TFP value in the micro-scale Indonesian manufacturing industry was often higher than the TFP value on the small scale, according to this study. This research also demonstrates that low-tech sub-sectors, such as the food processing industry, have low productivity. On a small size, the estimated TFP value shows a decreasing trend, but on a micro scale, the estimated TFP value indicates an increasing trend.


Keywords


Micro-small scale, Manufacturing industry, TFP, Levinsohn-Petrin

Full Text:

References


  1. Badan Pusat Statistik (2021). Konsep Industri Mikro Kecil. Jakarta: Badan Pusat Statistik Indonesia.https://www.bps.go.id/subject/170/industri-mikro-dan-kecil.html#subjekViewTab1.
  2. Branco, C., Domingues, T., and Martins, A. (2018). The Determinants of TFP Growth in the Portuguese Service Sector. GEE Papers, 114.
  3. Carlaw, K., & Kosempel, S. (2004). The Sources of Total Factor Productivity Growth: Evidence from Canadian Data. Economics of Innovation and New Technology, 13(4), 299–309. https://doi.org/10.1080/10438590410001629007
  4. De, P.K., Nagaraj, P. (2014). Productivity and firm size in India. Small Bus Econ, 42, 891–907. https://doi.org/10.1007/s11187-013-9504-x
  5. Dvouletý, O. and Blažková, I. (2021). Exploring firm-level and sectoral variation in total factor productivity (TFP). International Journal of Entrepreneurial Behavior & Research, 27(6), 1526-1547. https://doi.org/10.1108/IJEBR-11-2020-0744
  6. Eskani, I. (2010). Total Factor Productivity (TFP) Industri Menengah dan Besar di Indonesia. Dinamika Kerajinan Dan Batik, 28(September), 17–24.
  7. Faradila, F., & Kakinaka, M. (2020). Industrial estate, Firm’s Productivity, and International Trade Relationship: The Case of Indonesian Manufacturing Firms. Buletin Ilmiah Litbang Perdagangan, 14(1), 121–145.
  8. Giang, M., Xuan, T., Trung, B., Que, M., & Yoshida, Y. (2018). Impact of Investment Climate on Total Factor Productivity of Manufacturing Firms in Vietnam. Sustainability, 10(12), 4815. MDPI AG. Retrieved from http://dx.doi.org/10.3390/su10124815
  9. Haider, F., Kunst, R., & Wirl, F. (2021). Total Factor Productivity, Its Components and Drivers. Empirica, 48(2), 283–327. https://doi.org/10.1007/s10663-020-09476-4
  10. Ikhsan, M. (2007). Total Factor Productivity Growth in Indonesian Manufacturing: A Stochastic Frontier Approach. Global Economic Review, 36(4), 321–342. https://doi.org/10.1080/12265080701694488
  11. Kementerian Koperasi dan UKM (2021). Perkembangan Data Usaha Mikro, Kecil, Menengah (UMKM) dan Usaha Besar (UB). Jakarta: Kementerian Koperasi dan UKM Republik Indonesia.
  12. Korkmaz, S., & Korkmaz, O. (2017). The relationship between labor productivity and economic growth in OECD Countries. International Journal of Economics and Finance, 9(5), 71-76.
  13. Lee, J. W., & Xuan, Y. (2019). Effects of Technology and Innovation Management and Total Factor Productivity on The Economic Growth of China. Journal of Asian Finance, Economics and Business, 6(2), 63–73. https://doi.org/10.13106/jafeb.2019.vol6.no2.63
  14. Margono, H., & Sharma, S. C. (2006). Efficiency and Productivity Analyses of Indonesian Manufacturing Industries. Journal of Asian Economics, 17(6), 979–995. https://doi.org/10.1016/j.asieco.2006.09.004
  15. Muryani, & Chiputyani, L. (2019). The Analysis of Manufacturing Sector in Indonesia. KnE Social Sciences, 3(13), 1200. https://doi.org/10.18502/kss.v3i13.4277
  16. Nguyen, S. v, & Lee, S.-H. (2002). Returns to Scale in Small and Large U.S. Manufacturing Establishments: Further Evidence. Small Business Economics, 19, 41–50.
  17. Okamoto, Y., & Sjöholm, F. (2000). Productivity in The Indonesian Automotive Industry. ASEAN Economic Bulletin, 17(1). http://www.jstor.orgStableURL:http://www.jstor.org/stable/25773609
  18. Padilla, M. A. E. (2018). East Java’s Productivity Growth: Evidence of Industrialization in The Java Island. East Java Economic Journal, 2(2), 118-138. https://doi.org/10.53572/ejavec.v2i2.16
  19. Petrin, A., Statacorp, B. P. P., & Levinsohn, J. (2004). Production Function Estimation in Stata Using Inputs to Control for Unobservables. The Stata Journal, 4(2), 113–123.
  20. Purwono, R., Yasin, M., Hamzah, I., et al. (2021). Total factor productivity convergence of Indonesia’s provincial economies, 2011–2017. Regional Statistics, 11(4), 52-78.
  21. Ren, B., & Jie, W. (2019). An Empirical Study on The Returns to Scale of Supply Structure in China’s Economic Growth: 1993–2015. China Political Economy, 2(2), 354–372. https://doi.org/10.1108/cpe-10-2019-0019
  22. Saliola, F., Bank, W., & Şeker, M. (2012). Measuring Total Factor Productivity Using Micro-Level Data from Enterprise Surveys. https://doi.org/10.13140/RG.2.2.24979.68641
  23. Setiawan, M., Indiastuti, R., Indrawati, D., & Effendi, N. (2016). Technical efficiency and environmental factors of the micro, small, and medium enterprises in Bandung city: a slack-based approach. International Journal of Globalisation and Small Business, 8(1), 1. https://doi.org/10.1504/ijgsb.2016.076447
  24. Setiawan, M., Purnagunawan, M., Bustaman, A., Hermawan, W., Heriyaldi, Suara, Y. I. made, & Pradono, T. D. (2018). Estimating the Effects of Competition on the Sectoral Performances of Major Industries in Indonesia.
  25. Sudaryo, Y., & Permatasari, D. (2017). Strategy Development Micro Small and Medium Business Performance in Small and Medium Enerprises (SMEs) Cibaduyut Shoes Bandung. International Journal of Scientific & Technology Research, 6(3), 102–105.
  26. Sugiharti, L., Purwono, R., Primanthi, M. R., Angel, M., & Padilla, E. (2017). Indonesian Productivity Growth: Evidence from The Manufacturing Sector in Indonesia. Pertanika J. Soc. Sci. & Hum, 25(S), 29–44.
  27. Surjaningsih Bayu, N., & Permono, P. (2014). The Dynamics of Total Factor Productivity of Medium and Large Manufacturing in Indonesia. Buletin of Monetary, Economics and Banking, January.
  28. Tambunan, T. (2019). Recent Evidence of The Development of Micro, Small and Medium Enterprises in Indonesia. Journal of Global Entrepreneurship Research, 9(1). https://doi.org/10.1186/s40497-018-0140-4
  29. Tusianti, E., Prihatiningsih, D. R., & Santoso, D. H. (2019). Potensi Peningkatan Kinerja Usaha Mikro Kecil. Badan Pusat Statistik.
  30. Van Beveren, I. (2012). Total Factor Productivity Estimation: A Practical Review. Journal of Economic Surveys, 26(1), 98–128. https://doi.org/10.1111/j.1467-6419.2010.00631.x
  31. Vial, V. (2006). New Estimates of Total Factor Productivity Growth in Indonesian Manufacturing. Bulletin of Indonesian Economic Studies, 42(3), 357–369. https://doi.org/10.1080/00074910601053227
  32. Wafi, M., & Sari, D., (2021). Total Factor Productivity Analysis of Indonesian Textiles and Textile Products Industry. Jurnal Ilmu Ekonomi Terapan, 6(1), 15-31.
  33. Widodo, W., Salim, R., & Bloch, H. (2014). Agglomeration Economies and Productivity Growth in Manufacturing Industry: Empirical Evidence from Indonesia. Economic Record, 90(June), 41–58. https://doi.org/10.1111/1475-4932.12115
  34. Yasin, M. Z. (2021a). Measuring the Productivity of the Foods and Beverages Industries in Indonesia: What Factors Matter? Economics and Finance in Indonesia, 67(1), 132–146.
  35. Yasin, M. Z. (2021b). Technical Efficiency and Total Factor Productivity Growth of Indonesian Manufacturing Industry: Does Openness Matter? Studies in Microeconomics, 1–30. https://doi.org/10.1177/23210222211024438
  36. Yusuf, D., Firdaus, M., & Asmara, A. (2021). Productivity Growth and Local Content Requirement of the Manufacturing Industry in Banten Province. Jurnal Ekonomi & Studi Pembangunan, 22(2), 154–169. https://doi.org/10.18196/jesp.v22i2.11369

Refbacks

  • There are currently no refbacks.


Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.