Industrial demographics, industrial dynamics, and aggregate total factor productivity growth in Indonesian manufacturing, 1975-95
After an introductory chapter, chapter 2 reviews and assesses the existing theoretical and empirical literature on TFP growth. A detailed review of the economic and historical literature on productivity growth in Indonesian manufacturing follows. This allows constructing a new methodology for the estimation of aggregate TFP growth in Indonesian manufacturing, using a panel dataset of establishments over the period 1975-95. New estimates are presented and compared with historical evidence. Chapter 3 further emphasises the issue of establishments' heterogeneity by presenting a meticulous review of both the theoretical and empirical literature on industrial demography. Chapter 4 investigates further the heterogeneity of manufacturing establishments in terms of productivity, and size. It offers a comprehensive demographic study of manufacturing establishments over the 21-year period, focusing on productivity and size differentials, as well as on establishments' entry and exit. In a second part, relaxing the representative plant hypothesis and taking establishments' turnover effect into account, I present several decompositions of aggregate TFP growth into incumbents' contribution and the contribution of entrants and exiters. Chapter 5 draws on this literature and tests econometrically the different hypotheses aiming at an explanation of establishments' productivity heterogeneity. Hypotheses are tailored to the Indonesian manufacturing sector through a careful reference to the economic history of the sector. Chapter 6 offers three detailed historical and economic industry studies, aiming at the discovery of central factors and processes explaining the evolution of the manufacturing sector in terms of productivity change and establishments' demography. It also tests econometrically hypotheses regarding the main factors explaining survival and exit of establishments. Chapter 7 recalls the results of the reestimation of aggregate TFP growth using a new methodology, and brings together the main outcomes of the subsequent chapters, thereby offering an explanation of aggregate TFP growth with detailed microeconomic mechanisms.