Technical Efficiency and Return to Scale in The Indonesia Economy During The New Order and The Reformation Governments

Muchdie Muchdie(1*)

(1) Universitas Muhammadiyah Prof. DR. HAMKA
(*) Corresponding Author


This paper analyses technical efficiency and return to scale in the Indonesia economy during the year of 1967 to 2013. These range of years covering two eras of Indonesian government; the New Order era that lasted between the year of 1966 to 1998 and the Reformation era during the year 1998 to 2014. The analysis was also based on the Indonesia economy’s business cycle those categorised as Oil Booming Phase (1967-1981), Recession Phase (1982-1986), Deregulation Phase (1987-1996), Multidimension Crisis Phase (1997-2001) and Economic Recovery Phase (2002-1013). Using data on Gross Domestic Product based on constant price of the year 2000, capital stock with the same based year and employment (1967-2013), Cobb-Douglas production functions were exercised to calculate technical efficiency and  return to scale employing regression analysis tehniques. The results show that technical effiency during the New Order Goverment were better than those during Reformation Goverment.


technical efficiency, return to scale, New Order era, Reformation era.

Full Text:



Adams, J. (2006). “The Contibution of Science and Technology to Production”. the National Bureau of Economic Research, Cambridge Massachusetts.

Socia Prihawantoro, Alkadri, Mien Askinatin, Andi Tabrani, Supomo, Abd Azis Wasil, 2009, Peran Teknologi dalam Pertumbuhan Ekonomi Indonesia (The Role of Technology in the Indonesian Economic Growth), Badan Pengkajian dan Penerapan Teknologi, Jakarta.

Bao Hong, Tan. (2008). “Cobb-Douglas Production Function”., acessed on retrive on 22 June 2016.

Biresh K. Sahoo, Joe Zhu , Kaoru Tone, Bernhard M. Klemen. (2014). “Decomposing technical efficiency and scale elasticity in two-stage network DEA”. European Journal of Operational Research, 233(3), 584–594.

Boundless.(2016).“Impacts of Technological Change on Productivity.” Boundless economics., accessed on 26 June 2016.

Cobb C.W, and Douglas, P.H. (1928). “A Theory of Production”. American Economic Review, 18 (Supplement), 139-165.

Comin, D. 2006, Total Factor Productivity, New York University, New York.

Debasish. (2016). “Role of Technology in Economic Development”,, accessed on 22 June 2016.

Erkoc, T. E, (2012), “Estimation Methodology of Economic Efficiency: Stochastic Frontier Analysis versus Data Envelopment Analysis”, International Journal of Academic Research in Economics and Management Sciences, 1(1), 1-23.

Feng, G and Serletis, A. (2010), “Efficiency, Technical Change, and Returns to Scale in Large US Banks: Panel Data Evidence from an Output Distance Function Satisfying Theoretical Regularity”. Journal of Banking & Finance, 34(1), 127-138.

Galih Adhidarma. (2015). “Analisis Siklus Bisnis dan Indikator Ekonomi Pendahulu Indonesia Tahun 2000:Q2 – 2012:Q3”, MacroEconomics DashBoard, Fakultas Ekonomika dan Bisnis UGM, Available at :, accessed on 4 Juni 2016.

Gaspersz. V. 1996. Ekonomi Manajerial, Penerapan Konsep-Konsep Ekonomi Dalam Manajemen Bisnis Total (Managerial Economics : Application of Economic Concepts in Total Business Management), PT Gramedia Pustaka Utama, Jakarta. P; 222-233.

Gebreselasie, T.G. (2008). “Sectoral Elasticity of Substitution and Returns to Scale in South Africa”. South African Journal of Economics. Special Issue: Industrial growth and employment in South Africa. 76 (Issue Supplement s2), S110–S125.

Holyk, S. (2016), “Measuring Technical Efficiency and Economy on Scale in Finnish Food Processing Industry”. International Journal of Science: Basic and Applied Research, 27 (3), 226-238.

Krivonozhko, V. E. , Dvorkovich, A. V. , Utkin, O. B. , Zharkov I. D, Patrin, M. V. and Lyche A. V. (2007). “Computation of elasticity and scale effect in technical efficiency analysis of complex systems”. Computational Mathematics and Modeling, Volume 18, Issue 4, 432-452.

Page, J. M. Jr. (1980). “Technical Efficiency and Economic Performance: Some Evidence from Ghana”. Oxford Economic Papers, New Series, 32 (2), 319-339.

Pettinger, T. (2012). “Technical Efficiency Definition”, Get Economic Help in, accessed on 15 June 2015.

Salvatore, D. 1996. Managerial Economic in a Global Economy, Irwin McGraw Hill, Boston, 251.

Yudistira, D. (2004).”Efficiency in Islamic Banking: An Empirical Analysis of Eighteen Banks”. Islamic Economic Studies, 12 (1), 1-19.

Article Metrics

Abstract view(s): 1068 time(s)
PDF: 725 time(s)


  • There are currently no refbacks.