Real Output and Labour Productivity in Indonesian Manufacturing, 1975–90

Abstract

This article presents estimates of purchasing power parities, real output and labour productivity in medium and large scale manufacturing in a binary comparison between Indonesia and the USA in the benchmark year 1987, It applies an industry of origin approach, comparing product unit values from the censuses of both countries. The 1987 PPP for manufacturing was Rp 1,200/$. Gross value added per person employed in 1987 was 10% of that in the USA. With the use of national time series, the 1987 benchmark was extrapolated backwards and forwards to derive productivity comparisons for the years 1975–90 in 15 branches of manufacturing. 1975–80 was a period of catch-up, with labour productivity increasing from 7.7 to 10.6% of the US level. Between 1980 and 1990 catch-up stagnated: relative productivity remained unchanged despite considerable productivity growth in Indonesia, Comparisons with other Asian economies show that labour productivity in Indonesia was somewhat higher than in India, but was still lower in 1990 than that of South Korea in 1970.

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Notes on contributors

Adam Szirmai

I am grateful for comments from Bart van Ark, Haryo Aswicahyono, Yahya Jammd, Alex Koms, Chris Manning. Dirk Pilat, Kusmadi Saleh, Thee Kian Wie, two anonymous referees and participanll of seminars at the Research School of Pacific and Asian Studies at ANU, the Faculty of Economics of Universitas Indonesia and the Centre for Development Studies of the Indonesian Institute of Sciences (PEP-LIPI). Ineke van der Werf and Damhuri Nasution provided valuable statistical support.