The objectives of this paper are to estimate technical efficiency in rice production and to assess the effect of farm-specific socioeconomic factors on the technical efficiency using survey data from 15 provinces in Indonesia, collected in 2008. A stochastic frontier production function model is used to estimate the technical efficiency of rice farms in each province, and using the model, the influence of socioeconomic factors on efficiency is also measured. This study finds that there is a sizeable degree of variation of inefficiency between the 15 provinces. It also finds that factors like land size, income and source of funding are influential determinants of technical efficiency. In terms of age, it also found that younger farmers tend to be more efficient. Expanding the agricultural area, especially outside Java and Sumatera Islands, improving farmers' income and giving an incentive to young people to work in the agricultural sector will enhance technical efficiency and thus productivity, as well as the overall rice output
This study analyses the development of Indonesia within the Global Value Chain (GVC) and the transformation in its pattern of trade as a result of broader regional integration and more active participation within fragmented production networks. By employing an Inter-Country Input-Output model covering 64 countries and 34 different sectors, this study measures the integration of Indonesia within the Global Value Chain by breaking down its gross exports into components of value-added, covering the period of 1995 to 2015. The involvement of Indonesia within the GVC is analyzed through a set of indicators derived from a decomposition of the Leontief Input-Output system that completely splits gross exports into components of value-added. The system allows for differentiating value-added exports through intermediate inputs or final products, as well as direct exports, and indirect ones. The value-added components help to measure multiple-cross-border trade, domestic value, and foreign value embedded in exports, as well as to track how value-added travels across regional and global chains. The results indicate that Indonesian value-added exports expanded by more than 300% from 1995 to 2011, suggesting a change in the pattern of growth as the trade focus was re-directed towards Asian partners, mainly to specific sectors in East Asia: within mining (33% of the increase) and within manufacturing (41% of growth). Indonesia shifted towards exports of intermediate inputs within the initial section of the GVC. A substantial share of value-added goods traveled via regional partners towards international markets, although most of the domestic value-added remained in Asia. Indonesia differs from its ASEAN partners as it incorporates larger shares of domestic value-added in its exports than they do; it has a stronger role than they in exports of intermediate goods; it is more oriented towards regional partners; and has a lower presence than others within high technological exports.
This paper examines the impact of special tariffs between China and the United States (US) on their indirect trade partners via spillover effects. We applied a Value-Added Real Effective Exchange Rate (VA-REER) index to simulate how an increase in tariffs induces changes in demand for goods from Indonesia and selected Asian partners. We used the Input–Output Database (WIOD) to simulate the spillover effects across partners via the Global Value Chain (GVC) using data from 2000 to 2014. The results suggest that demand is doubly more responsive to prices (tariffs) when value-added (VA-REER) index is used instead of the conventional REER index (gross trade). We found that US tariffs on Chinese goods have a negative spillover impact on Indonesia’s exports. Meanwhile, the Chinese tariffs on American goods lead to small increased demand for Indonesian exports. We also found that US and China become equally crucial for Indonesia under the Value-Added REER scheme, concluding that the conventional REER approach may have underestimated the impact of US tariffs on Chinese goods. Finally, we found that Indonesia would be at risk to trade shocks if the US applies tariffs on China, Asian partners (Japan and South Korea), and the European Union (EU).
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