Is FDI Driver of Regional Productivity? New Evidence from Post- Pandemic Indonesia

Muhammad Faiz Al Anshari

Abstract


This study explores the determinants of total factor productivity (TFP) across 34 Indonesian provinces from 2021 to 2023, focusing on the role of foreign direct investment (FDI), manufacturing value added (MVA), and non-oil and gas exports. Using a Cobb–Douglas production function and fixed-effects panel regression, the analysis shows that FDI and MVA have positive and significant impacts on regional productivity, while commodity-based exports are negatively associated with TFP. These findings highlight the limitations of a raw export-led growth model and the importance of industrial deepening. Spatial fixed-effects further reveal persistent productivity disparities, influenced by geography, infrastructure, and institutional quality. The results suggest that enhancing productivity requires tailored policy strategies that support industrial diversification, improve local absorptive capacity, and address structural constraints. This study contributes to understanding post-pandemic regional productivity trends and provides timely insights for inclusive economic policymaking in Indonesia.


Keywords


productivity, FDI, manufacturing, exports, Indonesia

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DOI: https://doi.org/10.20961/bfde.v6i1.105230

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