Productivity in Indonesian agriculture: Impacts of domestic and international research

Abstract

Total factor productivity growth contributed 38% of Indonesia's agricultural output growth from the mid-1970s to the mid-2000s. This study uses time series data analysed with an error correction mechanism to examine the contribution that Indonesian publicly funded agricultural research made to this outcome, allowing for other possible determinants of productivity growth, including international agricultural research, extension, government price policy and weather. The results imply a 27% real annual rate of return from a marginal increase in Indonesian agricultural research expenditure. Indonesia's public agricultural research explains virtually all of its agricultural total factor productivity growth between 1975 and 2006.