Efficiency and Productivity of Indonesian Fishery Processing Industry: A Case of East Java Province using Time Varying Decay Stochastic Frontier Model

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Asikin, M., Daryanto, A., Machfud, M., & Dwijosumono, S. (2019). Efficiency and Productivity of Indonesian Fishery Processing Industry: A Case of East Java Province using Time Varying Decay Stochastic Frontier Model. Journal of Business Management and Economics, 7(02), 01–10. https://doi.org/10.15520/jbme.v7i02.2432
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Abstract

The fish processing industry has a strategic value for Indonesia's economic development because firms in this industry are more export-oriented with value-added growth that has quadrupled over the past 7 years. The issue of efficiency in the industry is an interesting study by researchers, but efficiency analysis in the fish processing industry is relatively rare. This study aims to analyze the total factor productivity that are decomposed into three components namely technical efficiency, economic of scale, and technological change. The study used panel data from 5,215 fish processing industry firms in East Java province over a period of 22 years from 1994-2015. The methodology used in this efficiency analysis is the translog stochastic frontier production function with a model of time varying decay. This model is using year variable as a proxy to see technological changes.The stochastic frontier production function use three input factors and one output variable. Model also identified six variables reflecting the source of inefficiency. The model shows that economic of scale in the East Java fishery processing industry is increasing that creates a cost advantages. This finding is very important to policy maker in making a program that support an economic growth.

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