SECTORAL VARIATIONS ON TECHNINAL EFFICIENCY AND RETURN TO SCALE IN THE INDONESIAN ECONOMY

This paper discusses on sectoral variations of technical effciency and return to scale in the Indonesian
economy. Employing regression analysis of Cobb-Douglas production function, thesecoefficientswere
calculated. Nine economic sectors in the Indonesian economy: Agriculture, Mining and Quarying,
Manufacturing, Electricity,Gas and Drinking Water, Construction, Trade, Hotel and Restaurant,
Transportation and Communication, Finance, Rental and Corporate Services, and Services, were
exercised to study the variation of those coefficiens. Sectoral data on gross domestic product, capital
stock and employment are those from the years 1967 to 2007 collected from many documents
available at the National Statistics Agency. The result shows that the coeffiecients of technical
efficiency do vary among sectors. Those sectors in which the coefficients were above that at the
national level, experienced decreasing return to scale. On the contrary, those sectors in which the
coeffiecients were below that at national level, experienced increasing return to scale.

NATIONAL, SECTORAL AND SPATIAL PERSPECTIVES ON TECHNICAL EFFICIENCY AND RETURNS TO SCALE IN INDONESIAN ECONOMY

This paper presents the results of analysis on technical efficiency and return to scale in the Indonesia on the
national, sectoral and spatial perspectives. National analysis was based on a macroeconomics cycles: oil
booming phase (1967-1981), recession phase (1982-1986), deregulation phase (1987-1996), multi-dimension
crisis phase (1997-2001) and economic recovery phase (2002-1013) and the government regime: the New
order (1966-1998) and Reformation governments (1999-2014). Sectoral analysis was based on the 9 sectors
classification, namely: Agriculture, Mining and Quarrying, Manufacturing, Electricity, Gas and Drinking
Water, Construction, Trade, Hotel and Restaurant, Transportation and Communication, Finance, Rental and
Corporate Services, and Services. Spatial analysis focused on seven groups of islands: Sumatera, Java,
Kalimantan, Sulawesi, Bali-Nusa Tenggara, Maluku, and Papua. Cobb Douglass production function was
employed to calculate technical efficiency and return to scale using regression analysis. Data on Gross
Domestic Product, Capital stock and Employment of the year of 1967-2013 used for national analysis, data of
year 1967-2007 for sectoral analysis and data of 1983-2013 for spatial analysis. The results show that firstly,
technical efficiency during the New Order Government was better than those during Reformation
Government. Secondly, those sectors in which the coefficients were above that at the national level,
experienced decreasing returns to scale. On the contrary, those sectors in which the coefficients were below
that at national level, experienced increasing returns to scale. Thirdly, the provinces with coefficients of
technical efficiency below that at national level exhibited increasing returns to scale. Otherwise, the provinces
with coefficients of technical efficiency above that at national level exhibited decreasing returns to scale.

TECHNOLOGICAL PROGRESS AND ECONOMIC GROWTH IN INDONESIA: AREGIONAL PERSPECTIVE

This paper examined the relationship between technological progress, measured by TFP growth, and
economic growth, measured by GDP growth, both at national and regional levels experienced by
Indonesia. Spatially, Indonesiawas disaggregated into 6 groups of Island: Sumatera, Java,
Kalimantan, Sulawesi, Nusa Tenggara dan Maluku-Papua. Coefficients of correlation were
calculated using simple regression model. Data resulted from a study at the Agency for the
Assessment and Application of Technology of the Government of Indonesia, 1984-2010, were used
for this study. The results showed that both at national level as well as at regional level the
correlation between technological progress and economic growth was positive and very strong.It is
then suggested that programs of technology development should continually be pushed in order to
maintain sustainable economic growth.