Title: Analysis and Determinants of Technical Efficiency of the Automotive Industry on the Island of Java
Author: Rizky Akbar Pratama
Affiliations : Master of Economics Program, Faculty of Economics and Business, Universitas Airlangga Surabaya, Indonesia
Publisher: Universitas Airlangga
Abstract
The automotive industry on the island of Java has become an important pillar in the national industrial sector. The aim of this research is to measure technical efficiency and analyze factors that influence the technical efficiency of the automotive industry on the island of Java based on province and ISIC code categorization, using the Stochastic Frontier Analysis (SFA) method by determining the appropriate model. The translog model was selected as the appropriate model when compared with other models. The estimation results show that the entire automotive industry in DKI Jakarta, West Java, Central Java and East Java has a technical efficiency score of less than 1, which means it is not yet efficient. The average efficiency in the automotive industry in the provinces of DKI Jakarta, West Java, Central Java and East Java experienced a drastic decline in 2014. The technical efficiency of the automotive industry in Central Java Province is higher than in the provinces of DKI Jakarta, West Java and East Java. The motor vehicle industry sub-sector has a lower technical efficiency value than the technical efficiency value of the spare parts industry. The inefficient function of automotive industry companies in four provinces on the island of Java is influenced by foreign capital ownership. The involvement of foreign capital owners tends to bring many changes in skills, expertise and advanced technology to companies, thereby affecting technical inefficiencies. Meanwhile, the variables company size, exports and industrial concentration have no effect on technical inefficiency.
Keywords: Automotive Industry, Technical Efficiency, Stochastic Frontier Analysis, Translog, Java Island
