Decomposing total factor productivity of SMEs in agricultural sector in Aceh, Indonesia

Abstract

Abstract This study measures and decomposes the Total Factor Productivity (TFP) of the SMEs in the agricultural sector across 23 regencies/cities in Aceh province, Indonesia during the 2015-2019 period. Using Data Envelopment Analysis (DEA), the study found a low level of SMEs’ productivity during the study period. The SMEs in Aceh province recorded different levels of TFP. Overall, the SMEs’ TFP has slightly declined, contributed mainly by an increase in efficiency level and a decline in the technical efficiency change. These findings showed the importance of adopting advanced agricultural-related technologies and implementing good SMEs’ governance principles to further improve SMEs’ TFP. Finally, the government must prioritize promoting non-productive SMEs across the 23 regencies/districts in the province by offering sufficient financial aids and conducting professional managerial training programs.