Efficiency and Productivity of Textile Industry Sub-sector with Total Factor Productivity Approaches

Abstract

The development of the manufacturing industry in Indonesia becomes a top priority because the manufacturing industry is a leading sector that can encourage other sectors and has forward and backward linkage between sectors.The difference in the use of technologythat still relatively low compared to the productivity of capital and labor will lead to differences in efficiency and productivity of each manufacturing industry sub-sector. The textile industry sub-sector contributes high amount to GDP and continues to increase every year. Total factor productivity (TFP) is considered a very comprehensive measure of productivity and efficiency.This measure explains the changes in production caused by changes in the amount of inputs used, changes in technology, capacity utilization and the quality of production factors. This study aims to analyze the effect of capital, labor, raw materials and energy to the output of the textile industry and textile products (TPT) (KBLI 14.15) with the Solow residual TFP approach. Another aim is to look at the efficiency and productivity of the textile industry sub-sector.The research used panel data regression with OLS model. The results of TFP estimation and TPT industry efficiency are different between TPT sub-sectors. TPT has integrity between downstream industries and upstream industries. Some of the obstacles in the textile industry in Indonesia include the high dependence of the Indonesian industry (TPT) on imported raw fiber materials (90%). Most of the age of the machines used by the TPT industry was old, this affects the TFP value.