Productivity growth of Indonesian rice production: sources and efforts to improve performance

Abstract

Purpose The purpose of this paper is to investigate the productivity of rice production by decomposing the growth of total factor productivity (TFP) into four components: technological change, scale effects, technical and allocative efficiencies. Design/methodology/approach This study employed an econometric approach to decompose TFP growth into four components: technological change, technical efficiency, allocative efficiency and scale effect. Unbalanced panel data used in this study were surveyed in 1994, 2004 and 2014 from 360 rice farming operations. The model used the stochastic frontier transcendental logarithm production technology to estimate the technology parameters. Findings The results indicate that the primary sources of TFP growth were technological change and allocative efficiency effects. The contribution of technical efficiency was low because it grew sluggishly. Research limitations/implications This study has several shortcomings, such as very low R2 and the insignificant elasticity of labour presented in the findings. Another limitation is the limited time period panel covering long interval, which resulted in unbalanced data. Practical implications The government should improve productivity growth by allocating more areas for rice production, which enhances the scale and efficiency effects and adjusting the use of capital and material inputs. Extension services should be strengthened to provide farmers with training on improved agronomic technologies. This action will enhance technical efficiency performance and lead to technological progress. Social implications As Indonesian population is still growing at a significant rate and the fact that rice is the primary staple food for Indonesian people, the productivity of rice production should increase continually to ensure social security at a national level. Originality/value The productivity growth is decomposed into four components using the transcendental logarithm production technology based on farm-level data. The measure has not been conducted previously in Indonesia, even in rice-producing countries.