Uncovering Productivity Growth in the Disaggregate: Indonesia's Dueling Agricultural Sub-Sectors

The success of seed-fertilizer technologies and government subsidies in attaining nearly self-sufficient rice production in the mid-1980s encouraged the Indonesian government soon afterward to shift resources away from food crops and toward export-oriented crops. These shifts were reinforced by trade liberalization and a sharp devaluation of the rupiah after the 1997 Asian financial crisis, which exerted Indonesia’s comparative advantage in tropical perennial products. In the present paper, we ask whether such events have altered Indonesia’s agricultural growth strategy from a food-crop to an export-crop one. With an innovative multi-output stochastic distance frontier model and provincial production and policy-related data from 1985 to 2005, we estimate technology growth by agricultural subsector and efficiency improvement by political jurisdiction. The perennial-crop sector is found to have achieved the highest technology growth rate, followed by the livestock and annual-crop sectors. We find overall productivity growth to have been moderate, and suggest that little of it can be attributed to Indonesia’s public research efforts