Productivity Performance in Indonesia's Manufacturing Sector
Relying on firm-level data from Statistik Industri this note analyzes the evolution of productivity dynamics of Indonesian firms over the past 20 years (1990-2009). Economy-wide and sectoral productivity changes are decomposed into their two main components: changes due to the evolution of average p...
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| Format: | Policy Note |
| Language: | English en_US |
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World Bank, Jakarta
2017
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| Online Access: | http://documents.worldbank.org/curated/en/485831468044119749/Productivity-performance-in-Indonesias-manufacturing-sector http://hdl.handle.net/10986/26715 |
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okr-10986-26715 |
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oai_dc |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
English en_US |
| topic |
ADVERSE CONSEQUENCES ADVERSE SELECTION ALLOCATIVE EFFICIENCY AVERAGE PRODUCTIVITY BANKS BARRIERS TO ENTRY BENCHMARK BORROWING BUSINESS ECONOMICS BUSINESS ENVIRONMENT BUSINESS INDICATORS BUSINESSES CAPITAL MARKETS COMMODITY COMPETITIVENESS CONTRACT ENFORCEMENT COPYRIGHT CREDIT RATIONING DEFAULT RISK DEVELOPMENT ECONOMICS ECONOMIC THEORY ECONOMICS ECONOMIES OF SCALE EFFICIENCY IMPROVEMENTS EMERGING MARKETS EMPIRICAL EVIDENCE EMPLOYMENT EMPLOYMENT CREATION EMPLOYMENT GROWTH ENTERPRISE SURVEY ENTERPRISE SURVEYS ENTREPRENEURSHIP EQUIPMENT EXPORT MARKETS EXPORTS FACTOR MARKETS FINANCIAL CONSTRAINTS FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL SYSTEM FINANCIAL SYSTEMS FIXED COSTS FOREIGN COMPETITION FOREIGN DIRECT INVESTMENT GDP GLOBAL ECONOMY IMPERFECT INFORMATION INCOME INDEX NUMBERS INDUSTRIAL DEVELOPMENT INDUSTRIAL STRUCTURE INDUSTRY PRODUCTIVITY INFORMATION NETWORKS INFORMATION SHARING INNOVATION INSPECTIONS INSTITUTION INSTITUTIONAL DEVELOPMENT INSTITUTIONAL FRAMEWORK INTEREST RATE INTERMEDIATE INPUTS JOB CREATION JOINT VENTURES LABOR REGULATIONS LAWS LEGAL PROVISIONS MANUFACTURING MARKET FACTORS MARKET POWER MARKET SHARE MARKET SHARES MEDIUM ENTERPRISES METALS MONITORING COSTS MONOPOLY MORAL HAZARD NATURAL ENDOWMENTS NATURAL RESOURCE NEW ENTRANTS OPEN ECONOMY OPTIMAL ALLOCATION OUTPUTS PERFECT COMPETITION POLITICAL ECONOMY PRIVATE SECTOR PRODUCERS PRODUCTION PROCESSES PRODUCTIVITY GROWTH PROFITABILITY PROPERTY RIGHTS R&D REGISTRIES REGULATORY ENVIRONMENT RENTS RESULTS RURAL BANKS SMALL BUSINESS SUPPLIERS TAX RATES TELECOMMUNICATIONS THEORETICAL MODELS TIME PERIOD TOTAL FACTOR PRODUCTIVITY TOTAL FACTOR PRODUCTIVITY GROWTH TOTAL OUTPUT TRANSACTION TRANSACTION COSTS TRANSPORT USES WAGES WEALTH |
| spellingShingle |
ADVERSE CONSEQUENCES ADVERSE SELECTION ALLOCATIVE EFFICIENCY AVERAGE PRODUCTIVITY BANKS BARRIERS TO ENTRY BENCHMARK BORROWING BUSINESS ECONOMICS BUSINESS ENVIRONMENT BUSINESS INDICATORS BUSINESSES CAPITAL MARKETS COMMODITY COMPETITIVENESS CONTRACT ENFORCEMENT COPYRIGHT CREDIT RATIONING DEFAULT RISK DEVELOPMENT ECONOMICS ECONOMIC THEORY ECONOMICS ECONOMIES OF SCALE EFFICIENCY IMPROVEMENTS EMERGING MARKETS EMPIRICAL EVIDENCE EMPLOYMENT EMPLOYMENT CREATION EMPLOYMENT GROWTH ENTERPRISE SURVEY ENTERPRISE SURVEYS ENTREPRENEURSHIP EQUIPMENT EXPORT MARKETS EXPORTS FACTOR MARKETS FINANCIAL CONSTRAINTS FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL SYSTEM FINANCIAL SYSTEMS FIXED COSTS FOREIGN COMPETITION FOREIGN DIRECT INVESTMENT GDP GLOBAL ECONOMY IMPERFECT INFORMATION INCOME INDEX NUMBERS INDUSTRIAL DEVELOPMENT INDUSTRIAL STRUCTURE INDUSTRY PRODUCTIVITY INFORMATION NETWORKS INFORMATION SHARING INNOVATION INSPECTIONS INSTITUTION INSTITUTIONAL DEVELOPMENT INSTITUTIONAL FRAMEWORK INTEREST RATE INTERMEDIATE INPUTS JOB CREATION JOINT VENTURES LABOR REGULATIONS LAWS LEGAL PROVISIONS MANUFACTURING MARKET FACTORS MARKET POWER MARKET SHARE MARKET SHARES MEDIUM ENTERPRISES METALS MONITORING COSTS MONOPOLY MORAL HAZARD NATURAL ENDOWMENTS NATURAL RESOURCE NEW ENTRANTS OPEN ECONOMY OPTIMAL ALLOCATION OUTPUTS PERFECT COMPETITION POLITICAL ECONOMY PRIVATE SECTOR PRODUCERS PRODUCTION PROCESSES PRODUCTIVITY GROWTH PROFITABILITY PROPERTY RIGHTS R&D REGISTRIES REGULATORY ENVIRONMENT RENTS RESULTS RURAL BANKS SMALL BUSINESS SUPPLIERS TAX RATES TELECOMMUNICATIONS THEORETICAL MODELS TIME PERIOD TOTAL FACTOR PRODUCTIVITY TOTAL FACTOR PRODUCTIVITY GROWTH TOTAL OUTPUT TRANSACTION TRANSACTION COSTS TRANSPORT USES WAGES WEALTH Javorcik, Beata Fitriani, Fitria Iacovone, Leonardo Varela, Gonzalo Duggan, Victor Productivity Performance in Indonesia's Manufacturing Sector |
| geographic_facet |
East Asia and Pacific Indonesia |
| description |
Relying on firm-level data from Statistik Industri this note analyzes the evolution of productivity dynamics of Indonesian firms over the past 20 years (1990-2009). Economy-wide and sectoral productivity changes are decomposed into their two main components: changes due to the evolution of average productivity and changes due to 'allocative efficiency'. This decomposition shows that while during the 20 years both components have increased, the changes in allocative efficiency have been mainly driven by average productivity growth and less by increases in allocative efficiency, even if the latter has also improved during the period under analysis. Interestingly, the note shows that both average Total Factor Productivity (TFP) growth and allocative efficiency improvements are especially driven by a few sectors: electronics, machinery and instruments, and textiles, clothing and footwear. Limited improvements in both allocative efficiency and average TFP have occurred instead in natural-resource-based sectors, sectors characterized by more limited competition and higher rents. This note emphasizes the importance of 'allocative efficiency' for productivity evolution because, in a context where firms are very different in their productivity, it becomes crucial how resources are allocated in the economy. This series of policy notes suggests that regulatory reforms, exposure to foreign competition and access to imported intermediate inputs are important determinants of allocative efficiency. The problem of a 'missing middle' is closely related to that of sub-optimal allocation of resources across firms: a strong feature of Indonesian firm-size distribution. Going further, the note suggests that burdensome regulations and imperfect financial markets are two important causes of this missing middle. To complement the focus on productivity, the note also analyzes firm-level job dynamics and points to the crucial role of 'start-ups' and new companies as a key driver of job creation. This finding suggests that the focus of policymakers on Small and Medium Enterprises (SMEs) may be misplaced and that this focus should start realigning towards supporting more dynamic 'start-ups' rather than SMEs. |
| format |
Policy Note |
| author |
Javorcik, Beata Fitriani, Fitria Iacovone, Leonardo Varela, Gonzalo Duggan, Victor |
| author_facet |
Javorcik, Beata Fitriani, Fitria Iacovone, Leonardo Varela, Gonzalo Duggan, Victor |
| author_sort |
Javorcik, Beata |
| title |
Productivity Performance in Indonesia's Manufacturing Sector |
| title_short |
Productivity Performance in Indonesia's Manufacturing Sector |
| title_full |
Productivity Performance in Indonesia's Manufacturing Sector |
| title_fullStr |
Productivity Performance in Indonesia's Manufacturing Sector |
| title_full_unstemmed |
Productivity Performance in Indonesia's Manufacturing Sector |
| title_sort |
productivity performance in indonesia's manufacturing sector |
| publisher |
World Bank, Jakarta |
| publishDate |
2017 |
| url |
http://documents.worldbank.org/curated/en/485831468044119749/Productivity-performance-in-Indonesias-manufacturing-sector http://hdl.handle.net/10986/26715 |
| _version_ |
1764462542868971520 |
| spelling |
okr-10986-267152021-04-23T14:04:37Z Productivity Performance in Indonesia's Manufacturing Sector Javorcik, Beata Fitriani, Fitria Iacovone, Leonardo Varela, Gonzalo Duggan, Victor ADVERSE CONSEQUENCES ADVERSE SELECTION ALLOCATIVE EFFICIENCY AVERAGE PRODUCTIVITY BANKS BARRIERS TO ENTRY BENCHMARK BORROWING BUSINESS ECONOMICS BUSINESS ENVIRONMENT BUSINESS INDICATORS BUSINESSES CAPITAL MARKETS COMMODITY COMPETITIVENESS CONTRACT ENFORCEMENT COPYRIGHT CREDIT RATIONING DEFAULT RISK DEVELOPMENT ECONOMICS ECONOMIC THEORY ECONOMICS ECONOMIES OF SCALE EFFICIENCY IMPROVEMENTS EMERGING MARKETS EMPIRICAL EVIDENCE EMPLOYMENT EMPLOYMENT CREATION EMPLOYMENT GROWTH ENTERPRISE SURVEY ENTERPRISE SURVEYS ENTREPRENEURSHIP EQUIPMENT EXPORT MARKETS EXPORTS FACTOR MARKETS FINANCIAL CONSTRAINTS FINANCIAL CRISIS FINANCIAL INSTITUTIONS FINANCIAL MARKETS FINANCIAL SYSTEM FINANCIAL SYSTEMS FIXED COSTS FOREIGN COMPETITION FOREIGN DIRECT INVESTMENT GDP GLOBAL ECONOMY IMPERFECT INFORMATION INCOME INDEX NUMBERS INDUSTRIAL DEVELOPMENT INDUSTRIAL STRUCTURE INDUSTRY PRODUCTIVITY INFORMATION NETWORKS INFORMATION SHARING INNOVATION INSPECTIONS INSTITUTION INSTITUTIONAL DEVELOPMENT INSTITUTIONAL FRAMEWORK INTEREST RATE INTERMEDIATE INPUTS JOB CREATION JOINT VENTURES LABOR REGULATIONS LAWS LEGAL PROVISIONS MANUFACTURING MARKET FACTORS MARKET POWER MARKET SHARE MARKET SHARES MEDIUM ENTERPRISES METALS MONITORING COSTS MONOPOLY MORAL HAZARD NATURAL ENDOWMENTS NATURAL RESOURCE NEW ENTRANTS OPEN ECONOMY OPTIMAL ALLOCATION OUTPUTS PERFECT COMPETITION POLITICAL ECONOMY PRIVATE SECTOR PRODUCERS PRODUCTION PROCESSES PRODUCTIVITY GROWTH PROFITABILITY PROPERTY RIGHTS R&D REGISTRIES REGULATORY ENVIRONMENT RENTS RESULTS RURAL BANKS SMALL BUSINESS SUPPLIERS TAX RATES TELECOMMUNICATIONS THEORETICAL MODELS TIME PERIOD TOTAL FACTOR PRODUCTIVITY TOTAL FACTOR PRODUCTIVITY GROWTH TOTAL OUTPUT TRANSACTION TRANSACTION COSTS TRANSPORT USES WAGES WEALTH Relying on firm-level data from Statistik Industri this note analyzes the evolution of productivity dynamics of Indonesian firms over the past 20 years (1990-2009). Economy-wide and sectoral productivity changes are decomposed into their two main components: changes due to the evolution of average productivity and changes due to 'allocative efficiency'. This decomposition shows that while during the 20 years both components have increased, the changes in allocative efficiency have been mainly driven by average productivity growth and less by increases in allocative efficiency, even if the latter has also improved during the period under analysis. Interestingly, the note shows that both average Total Factor Productivity (TFP) growth and allocative efficiency improvements are especially driven by a few sectors: electronics, machinery and instruments, and textiles, clothing and footwear. Limited improvements in both allocative efficiency and average TFP have occurred instead in natural-resource-based sectors, sectors characterized by more limited competition and higher rents. This note emphasizes the importance of 'allocative efficiency' for productivity evolution because, in a context where firms are very different in their productivity, it becomes crucial how resources are allocated in the economy. This series of policy notes suggests that regulatory reforms, exposure to foreign competition and access to imported intermediate inputs are important determinants of allocative efficiency. The problem of a 'missing middle' is closely related to that of sub-optimal allocation of resources across firms: a strong feature of Indonesian firm-size distribution. Going further, the note suggests that burdensome regulations and imperfect financial markets are two important causes of this missing middle. To complement the focus on productivity, the note also analyzes firm-level job dynamics and points to the crucial role of 'start-ups' and new companies as a key driver of job creation. This finding suggests that the focus of policymakers on Small and Medium Enterprises (SMEs) may be misplaced and that this focus should start realigning towards supporting more dynamic 'start-ups' rather than SMEs. 2017-05-23T15:09:56Z 2017-05-23T15:09:56Z 2012-09 Policy Note http://documents.worldbank.org/curated/en/485831468044119749/Productivity-performance-in-Indonesias-manufacturing-sector http://hdl.handle.net/10986/26715 English en_US CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Jakarta Economic & Sector Work :: Policy Note Economic & Sector Work East Asia and Pacific Indonesia |