Convergence Of Efficiency In Manufacturing Industry In Indonesia: Stochastic Frontier Analysis Approach

• Main Authors: MOHAMMAD ZEQI YASIN, 041311133128, Dyah Wulan Sari, Ph.D.
• Format: Article PeerReviewed
• Language: English; Indonesian; English
• Published: PalArch Foundation 2020
• Subjects: H Social Sciences; HB Economic Theory; HD Industries. Land use. Labor
• Online Access: https://repository.unair.ac.id/113959/2/Dyah%20WulanS_Artikel207.pdf; https://repository.unair.ac.id/113959/1/Dyah%20Wulan%20Sari_PeerReview207.pdf; https://repository.unair.ac.id/113959/3/Dyah%20WulanS_Similarity207_CONVERGENCE%20OF%20EFFICIENCY.pdf; https://repository.unair.ac.id/113959/; https://archives.palarch.nl/index.php/jae/article/view/988
• Institution: Universitas Airlangga

Background The optimal and progressive level of efficiency will be a reflection of the competitiveness of the manufacturing industry in Indonesia because this sector is related with economic growth. Aim This study aims to examine the convergence of efficiency in the manufacturing industry in Indonesia. Method The Stochastic Frontier Analysis (SFA) approach is used to test 24 subsectors of large and medium scale manufacturing industries for 6 years. Data obtained through the Indonesian Central Bureau of Statistics were analyzed using the translog and Cobb Doglas approach. Result Labor, capital values and output have fluctuated for 6 years related to the global crisis and goverment policy. Based on the estimation results, the production function in 20 sub-sectors are in accordance with the Translog approach, while the other 4 sub-sectors are in accordance with the Cobb Douglas approach. All manufacturing sub-sectors in Indonesia experience divergent conditions. The decrease in efficiency that occurred in all sub-sectors of the manufacturing industry was due to inter-subsidies because the company's operations were disrupted. Conclusion Inefficiencies in the manufacturing industry need to be overcome by increasing industrial operational support.