Revitalizing Indonesia’s Manufacturing: The Productivity Conundrum

Speaker: 
Zulfan Tadjoeddin
Date: 
Wednesday, October 12, 2016
Time: 
10:00 - 12:00 (GMT+7)
Venue: 
Graha Bintang, 7th Floor, Jl. Cikini Raya No. 55 Jakarta
Contact Name: 
Zulfan Tadjoeddin
Contact Email: 
Z.Tadjoeddin@westernsydney.edu.au

 

Abstract

In light to continuing importance of the manufacturing sector, but declining dynamism, this paper investigates trends in productivity at firm levels. It finds that labour productivity has been either stagnant or falling in labour intensive manufacturing. The paper uses firm level cross-sectional and time series data and employs GMM techniques to estimates determinants of productivity. It finds that real wage is the most important variable that influences firm level productivity, followed by capital intensity. Contrary to the common perception, foreign ownership and export-orientation are not found to have statistically significant influence on firm level productivity. This finding is consistent for firms of all sizes – large, medium, small and micro. This implies that Indonesia can use wages policy, as Singapore did during the late 1970s-mid 1980s, to upgrade its manufacturing to higher value added activities.