THE MICRO-DYNAMICS OF CATCH-UP IN INDONESIAN PAPER MANUFACTURING
Note: We would like to express our gratitude to Mika Maliranta and Statistics Finland for facilitating access to the Finnish Manufacturing Census. We also thank the Centre for Strategic and International Studies (CSIS) in Jakarta, Indonesia for hosting the first author in 2001 and two referees for valuable comments. Previous versions of this paper were presented at the DEGIT X conference in Mexico City, 2005, the TEG-EUKLEMS conference on productivity measurement in Groningen, 2005, and the Globelics Conference in Trivandrum in October 2006.
Abstract
In this study we analyze the micro-dynamics of catch-up in Indonesian paper manufacturing, using a two-country plant-level dataset for the period 1975–97. We apply data envelopment analysis (DEA) to measure to what extent Indonesian paper mills are catching up with Finnish mills in terms of technical efficiency. Three questions are addressed: What is the distribution of Indonesian plant technical efficiency vis-à-vis the technological frontier? What is the role of entry, exit, and survival in Indonesia for catch-up in the paper industry as a whole? In what ways do catching-up plants in Indonesia differ from non-catching-up plants? We find that on average the Indonesian paper industry moved closer to the technological frontier during the 1990s. However, catch-up has been a highly localized process in which only a few large establishments have achieved near best-practice performance, while most other plants have stayed behind.
