Function of Production, Capital, Labor and Government Policy in The Coal Mining Sector - Case Study of an Indonesian Coal Mining Company

Abstract

This study aims to determine the effect of labor, capital, and government policies on coal output and the scale of coal business results of PT Indo Tambangraya Megah Tbk. The new thing from this research is the Cobb-Douglas production function which usually uses labor and capital variables, but in this study, it has been expanded by adding policy variable in the form of Law No. 4 of 2009 regarding Mineral and Coal Mining, which is not yet present in other studies. The research method is linear regression using the Cobb-Douglas model function. The results showed that labor did not significantly influence coal production. Capital has a significant effect on model 2 and policy has a significant effect on model 3. The coal mining business of PT Indo Tambangraya Megah Tbk is in decreasing return to scale because if the three variables are combined, it will be worth -0.24. This condition occurs because the additional output produced is smaller than the additional input (δ% output <δ% input).