TREND OF THE TOTAL FACTOR PRODUCTIVITY GROWTH OF THE INDONESIAN ECONOMIC SECTORS MAMAN SETIAWAN 1 CENTER FOR ECONOMICS AND DEVELOPMENT STUDIES UNIVERSITAS PADJADJARAN GUNTUR SUGIYARTO ASIAN DEVELOPMENT BANK HSI 2017 - HITOTSUBASHI UNIVERSITY JAPAN 31 JULY 01 AUGUST 2017 1 Corresponding author: maman.setiawan@unpad.ac.id
MOTIVATION Productivity growth contributes to the performance of the economic growth overtime. Total factor productivity growth is a measure of the productivity growth based on multi inputs. Currently, most of the previous research of the total factor productivity (TFP) or multi-factor productivity (MFP focused on the manufacturing sector in Indonesian economy. Osada (1994), Abimanyu and Xie (1994), Timmer (1999), Aswicahyono et.al. (1996), Firdausy (2005) and Setiawan et al. (2017) investigated on the subsectors of the Indonesian manufacturing sectors. Investigating the TFP growth for all economic sectors has contribution to the literature and poliy making.
MOTIVATION This research Investigates the recent trends of the total factor productivity (TFP) growth or multi-factor productivity (MFP) growth in the Indonesian economic sectors. This research also calculates the contributions of the inputs and TFP growth on the output growth.
LITERATURE REVIEW Firdausy (2005) found that Indonesian manufacturing sector has low productivity. Aswicahyono et.al. (1996) found that the TFP growth was 2.1 per cent in the manufacturing sector for the period 1986-1991 Abimanyu and Xie (1994) found 1 per cent TFP growth in the Indonesian maufacturing sector for the period 1985-1990. Osada (1994) etimates the TFP growth of the Indonesian manufacturing sectors and found two estimates for the same period, 2.1 per cent and 3.6 per cent. More over, Timmer (1999) estimated that TFP performance across industries and found a high variation across industries. The TFP growth rates ranged from very high (12 %) in the wood industry to low (-5%) for chemicals during the period 1975-1981.
LITERATURE REVIEW O mahony and Timmer (2009) investigates the output, input and productivity growth using EU KLEMS growth and productivity. They investigated the productivity growth for European Countries, Japan and US for the period from 1970 onward. Coremberg (2012) used the modified KLEMS to estimate the productivity growth in Argentina using the period 1990-2010. Mas et al. (2008) estimated productivity growth using the KLEMS database in Spain and Italy using the period from 1980 to 2005. There is no such research in the Indonesian economy. Therefore, the research estimating productivity growth using KLEMS database is relevant in the Indonesian economy.
METHOD Estimating the total productivity growth using Growth and Productivity Accounts using ASIA KLEMS Methodology: Y j =f j (K j, L j,x j,t) ln Y v X ln X v k jk ln K v L ln L ln t j lnt j lny v X ln X v k jk ln K v L ln L Growth of MFP is defined as the real growth of output minus a weighted growth of inputs where denotes the change between year t-1 and t, and with a bar denoting period averages and is the two period average share of the input in the nominal value of output. The value share of each input in the output is defined as follows: X L P X X P L L v ; v ; Y Y P Y P Y v K P K Y P K Y
DATA This research uses the KLEMS database sourced from Indonesia Manufacturing Survey using the codes from International Standard for Industrial Classification (ISIC) or Klasifikasi Baku Lapangan Usaha Indonesia. This research uses the period from 1996 to 2011 for which the data are complete for the estimation. This research uses 33 economic sectors of 35 economic sectors. The data of two sectors i.e. (i) Sale, maintenance and repair of motor vehicles and motorcycles; retail sale of fuel and (ii) Private households with employed persons cannot be provided by the Indonesian Bureau of Central Statictics
DATA List of 33 Economic Sectors Description of Economic Sector Code Agriculture, hunting, forestry and fishing AtB Mining and quarrying C Food, beverages and tobacco 15t16 Textiles and textile 17t18 Leather, leather and footwear 19 Wood and of wood and cork 20 Pulp, paper, paper, printing and publishing 21t22 Coke, refined petroleum and nuclear fuel 23 Chemicals and chemical 24 Rubber and plastics 25 Other non-metallic mineral 26 Basic metals and fabricated metal 27t28 Machinery, nec 29 Electrical and optical equipment 30t33 Transport equipment 34t35
DATA List of 33 Economic Sectors Description of Economic Sector Code Manufacturing nec; recycling 36t37 Electricity, gas and water supply E Construction F Wholesale trade and commission trade, except of motor vehicles and motorcycles 51 Retail trade, except of motor vehicles and motorcycles; repair of household goods 52 Hotels and restaurants H Inland transport 60 Water transport 61 Air transport 62 Supporting and auxiliary transport activities; activities of travel agencies 63 Post and telecommunications 64 Financial intermediation J Real estate activities 70 Renting of m&eq and other business activities 71t74 Public admin and defence; compulsory social security L Education M Health and social work N Other community, social and personal services O
DATA Inputs used in this research include intermediate input, number of employee and capital compensation with the constant price using year 1995 for the variables applied in monetary units. Intermediate input is the index of the intermediate input volume. Number of employee is the representation of labor used in the sector measured in thousand unit. Capital compensation is the measure of capital services measured in million Rupiah. Average share of the intermediate input is calculated based on the two period average share of the nominal intermediate input in the nominal value of output. Average share of the capital input is calculated based on the two period average share of the nominal fixed capital formation in the nominal value of output. Average share of the labor input is calculated based on the two period average share of the nominal labor compensation in the nominal value of output.
RESULTS DESCRIPTIVE STATISTICS Variable Mean Standard Gross output by industry at constant prices Deviation Minimum Maximum (millions Rp) 5.56*10 9 4.19*10 9 1.05*10 9 1.45*10 10 Intermediate inputs at constant purchasers' prices (millions Rp) 2.73*10 9 2.05*10 9 5.01*10 8 7.11*10 9 Number of employees (Thousands) 36173.82 4656.75 29411 44711 Capital compensation (Million Rupiah) 1.49*10 9 1.16*10 9 2.71*10 8 3.94*10 9 Labor compensation (Million Rupiah) 1.33*10 9 9.45*10 8 2.78*10 8 3.34*10 9 Price indices of Gross output, 1995=100 369.35 205.58 100 791 Price indices of intermediate input, 1995=100 361.24 201.64 100 785
RESULTS DESCRIPTIVE STATISTICS Variable Mean Standard Minimum Maximum Deviation Volume index of gross output, 1995=100 131.41 30.15 96 191 Volume index of intermediate input, 1995=100 138 32.73 98 201 Price indices of the gross fixed capital formation, 1995=100 430.77 273.57 100 986 Gross fixed capital formation (Million 8.07*10 8 Rp) 8.24*10 8 1.40*10 8 2.98*10 9
RESULTS description of economic sector Period (1) (2) (3) (4) Average of all economic sectors 0.114 0.088-0.010 0.065 Agriculture, hunting, forestry and fishing 0.194 0.038 0.158 0.132 Mining and quarrying 0.289 0.110 0.150 0.181 Food, beverages and tobacco 0.177 0.092 0.141 0.137 Textiles and textile 0.151 0.028 0.098 0.093 Leather, leather and footwear 0.146 0.036-1.837-0.632 Wood and of wood and cork 0.122 0.097 0.133 0.118 Pulp, paper, paper, printing and publishing 0.081 0.088 0.087 0.085 Coke, refined petroleum and nuclear fuel 0.196 0.210 0.064 0.151 Chemicals and chemical 0.173-0.029 0.128 0.093 Rubber and plastics 0.185 0.033 0.041 0.084 Other non-metallic mineral 0.154 0.068 0.091 0.104 Basic metals and fabricated metal 0.196 0.072 0.052 0.103 Notes: (1) period 1996-2000 (2) period 2001-2005 (3) period 2006-2011 (4) period 1996-2011 TFP growth of Indonesian economic sectors
RESULTS TFP growth of Indonesian economic sectors description of economic sector Period (1) (2) (3) (4) Machinery, nec 0.181 0.087 0.139 0.136 Electrical and optical equipment 0.181 0.049 0.081 0.102 Transport equipment 0.176 0.110 0.116 0.133 Manufacturing nec; recycling 0.089 0.102 0.130 0.108 Electricity, gas and water supply -0.168 0.020-0.059-0.069 Construction 0.183 0.129 0.167 0.160 Wholesale trade and commission trade, except of motor vehicles and motorcycles 0.144 0.062 0.103 0.103 Retail trade, except of motor vehicles and motorcycles; repair of household goods 0.144 0.074 0.106 0.108 Hotels and restaurants 0.060 0.060 0.017 0.044 Inland transport 0.089 0.133 0.081 0.100 Water transport 0.048 0.095-0.787-0.251 Notes: (1) period 1996-2000 (2) period 2001-2005 (3) period 2006-2011 (4) period 1996-2011
RESULTS description of economic sector Period (1) (2) (3) (4) Air transport 0.185 0.033 0.137 0.119 Supporting and auxiliary transport activities; activities of travel agencies 0.089 0.074 0.046 0.068 Post and telecommunications -0.043-0.004-0.085-0.047 Financial intermediation 0.038 0.049 0.016 0.033 Real estate activities 0.124 0.117 0.050 0.094 Renting of m&eq and other business activities -0.004 0.354-0.039 0.095 Public admin and defence; compulsory social security 0.055 0.070 0.047 0.057 Education 0.255 0.096 0.128 0.158 Health and social work 0.254 0.127 0.050 0.138 Other community, social and personal services 0.177 0.210-0.070 0.095 Notes: (1) period 1996-2000 (2) period 2001-2005 (3) period 2006-2011 (4) period 1996-2011 TFP growth of Indonesian economic sectors
RESULTS 10 economic sectors with highest TFP growth Economic Sectors TFP Growth Mining and quarrying 0.181 Construction 0.160 Education 0.158 Coke, refined petroleum and nuclear fuel 0.151 Health and social work 0.138 Food, beverages and tobacco 0.137 Machinery, nec 0.136 Transport equipment 0.133 Agriculture, hunting, forestry and fishing 0.132 Air transport 0.119
RESULTS 10 economic sectors with lowest TFP growth Economic Sectors TFP Growth Pulp, paper, paper, printing and publishing 0.085 Rubber and plastics 0.084 Supporting and auxiliary transport activities; activities of travel agencies 0.068 Public admin and defence; compulsory social security 0.057 Hotels and restaurants 0.044 Financial intermediation 0.033 Post and telecommunications -0.047 Electricity, gas and water supply -0.069 Water transport -0.251 Leather, leather and footwear -0.632
RESULTS Inputs and TFP growth contribution on the economic growth Period 1996-2011 Tahun Inputs and TFP growth contribution Intermediate input Labor Capital TFP growth 1996 0.068 0.019 0.039 0.082 1997 0.039 0.022 0.036 0.119 1998-0.103-0.009 0.067 0.308 1999 0.020 0.025 0.033 0.061 2000 0.077 0.009 0.030 0.085 2001 0.028 0.013 0.024 0.114 2002 0.017-0.001 0.033 0.059 2003 0.026-0.009 0.000 0.065 2004 0.027 0.013 0.026 0.069 2005 0.012 0.007-0.002 0.132 2006 0.032 0.021 0.055 0.089 2007 0.020 0.010 0.021 0.086 2008 0.034 0.004 0.042 0.129 2009 0.004 0.007 0.024 0.059 2010 0.025 0.012 0.042 0.034 2011 0.025 0.015 0.544-0.455 1996-2011 0.022 0.010 0.063 0.065
RESULTS Inputs contribution on the economic growth based on the Economic sectors Description of economic sector Inputs contribution Intermediate input Labor Capital Agriculture, hunting, forestry and fishing 0.010 0.014 0.008 Mining and quarrying 0.005 0.007 0.010 Food, beverages and tobacco 0.033-0.003 0.004 Textiles and textile 0.005 0.005 0.006 Leather, leather and footwear 0.008 0.003 0.730 Wood and of wood and cork -0.034 0.003 0.007 Pulp, paper, paper, printing and publishing 0.024 0.009 0.009 Coke, refined petroleum and nuclear fuel -0.011 0.008 0.005 Chemicals and chemical 0.036 0.005 0.012 Rubber and plastics 0.040 0.005 0.017 Other non-metallic mineral 0.007 0.003 0.027 Basic metals and fabricated metal 0.004 0.004 0.037 Machinery, nec 0.006 0.000 0.000
RESULTS Inputs contribution on the economic growth based on the Economic sectors Description of economic sector Inputs contribution Intermediate input Labor Capital Electrical and optical equipment 0.049 0.007 0.000 Transport equipment 0.003 0.003 0.000 Manufacturing nec; recycling 0.034 0.003 0.001 Electricity, gas and water supply 0.085 0.001 0.197 Construction 0.019 0.006 0.001 Wholesale trade and commission trade, except of motor vehicles and motorcycles 0.027 0.019 0.016 Retail trade, except of motor vehicles and motorcycles; repair of household goods 0.027 0.022 0.016 Hotels and restaurants 0.004 0.062 0.018
RESULTS Inputs contribution on the economic growth based on the Economic sectors Description of economic sector Inputs contribution Intermediate input Labor Capital Inland transport 0.046-0.001 0.029 Water transport 0.051 0.005 0.347 Air transport 0.003 0.011 0.037 Supporting and auxiliary transport activities; activities of travel agencies 0.009 0.008 0.046 Post and telecommunications 0.065 0.031 0.180 Financial intermediation -0.004 0.007 0.080 Real estate activities 0.047 0.013 0.033 Renting of m&eq and other business activities 0.026 0.018 0.026 Public admin and defence; compulsory social security 0.022 0.014 0.083 Education 0.044 0.004 0.032 Health and social work -0.006 0.018 0.022 Other community, social and personal services 0.037 0.015 0.054
CONCLUSION The total factor productivity in Indonesian economy was 6.5% during the period 1996-2011. The trend of the TFP growth tended to decline during the period from 1996 to 2011. This research also found that few economic sectors have negative total factor productivity growth. The average contribution of TFP growth on the output growth was the highest during the period 1996-2011. Capital was the input with highest contribution to the output growth during the period 1996-2011 followed by intermediate input and labor, on average. There were variations of the contribution of the inputs on the output growth among the economic sectors.
DISCUSSION