Abstract
This research aims to investigate the pattern of and decompose the growth of total factor productivity (TFP) in the Indonesian chemical industry (ISIC 35) during the period of trade reform (1981-2000). Using data envelopment analysis (DEA) output-oriented Malmquist productivity index, TFP growth can be decomposed into efficiency change and technological change. Results of the two-digit level of the chemical industry show that generally, the growths of TFP were positive during all sample periods, with the main driver being efficiency change. The exception was in the sub-period of further reform (1992-1996), where TFP growth was negative. These results are similar to the analysis of three-digit levels in sub-periods. Exceptions are in combined industries of other chemical industries (ISIC 352) and industrial chemical industries (ISIC 351) and plastic industries (ISIC 356), where TFP growths were negative in the sub-period of further reform). The implication of this study shows that trade reform policy may have a different effect across sub-sectors and sub-periods in the Indonesian chemical industry.
Keywords:
data envelopment analysis method, Malmquist productivity index, Indonesia chemical industry