Infrastructure Role on Productivity in Manufacturing Sector in Indonesia

Both SFP and TFP are believed as tools to measure productivity. This means that those measurements can be used to assess economic performance. How-ever, each measurement has its own superiority, which relies on the purposes and the availability of sources to calculate it. Indonesia’s economy which consists of 11 sectors shows a positive growth in around last 10 years. Those sectors are manufacturing sector, agriculture sector and trade sector. Among those sectors, there are several sectors having bigger share on national GDP compare to the rest. However, the magnitude of each sector share in GDP is not solely determined by the sector itself, but it also influenced by other factors. One believed as the supporting factor is infrastructure. Therefore, this paper will examine the role of infrastructure on the productivity in manufacturing sector in Indonesia and analyze which kind of infrastructures that highly contributes to the productivity. The paper is measuring productivity labor productivity as one form of SFP. Based on the calculation, this paper excludes the TFP calculation as the productivity measurement due to unconvincing result. To assess the role of infrastructures in productivity in the manufacturing sector in Indonesia during 2000-2009, by using a panel data set which includes all provinces, the estimation is conducted. The result shows that the best method to estimate the model is Random Effect method. Further analysis reveals that all of observed variables show a positive sign but some of those variables are insignificant. Province level analysis also conducted to examine whether geographical condition also have effect to productivity. To sum up, the results signify that during the period of 2000 to 2009, la-bor productivity in manufacturing sector in Indonesia shows a positive and significant relation to infrastructures. It can be concluded that labor productivity in manufacturing sector in Indonesia is influenced by infrastructure provisions. Moreover, government of Indonesia should improve infrastructures provisions across provinces which related to manufacturing sector. Not only improvements in the quantity and quality of infrastructures, but also reduce the inequality and uneven infrastructure distribution. By improving the infrastructures related to manufacturing sector, it can increase welfare through multiplier effects not only for the labor but also for the society. Relevance to Development Studies Productivity is considered as one indicator of economic performance in a de-veloping country. By observing and measuring productivity in relation to the factors that influence on productivity, a developing country can improve and enhance its welfare through policies that drawn from the productivity analysis.