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SECTORAL VARIATIONS ON TECHNINAL EFFICIENCY AND RETURN
TO SCALE IN THE INDONESIAN ECONOMY
Muchdie, Muchdie
This paper discusses on sectoral variations of technical effciency and return to scale in the Indonesian
economy. Employing regression analysis of Cobb-Douglas production function, thesecoefficientswere
calculated. Nine economic sectors in the Indonesian economy: Agriculture, Mining and Quarying,
Manufacturing, Electricity,Gas and Drinking Water, Construction, Trade, Hotel and Restaurant,
Transportation and Communication, Finance, Rental and Corporate Services, and Services, were
exercised to study the variation of those coefficiens. Sectoral data on gross domestic product, capital
stock and employment are those from the years 1967 to 2007 collected from many documents
available at the National Statistics Agency. The result shows that the coeffiecients of technical
efficiency do vary among sectors. Those sectors in which the coefficients were above that at the
national level, experienced decreasing return to scale. On the contrary, those sectors in which the
coeffiecients were below that at national level, experienced increasing return to scale.
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