Measuring inefficiency of MSEs in the food processing sector

Abstract

The food processing sector is a sector that consistently contributes to gross domestic product (GDP) for the non-Oil and Gas industry and also a sector that can deal with various economic shocks. A business form in this industry is still dominated by Micro and Small Enterprises (MSEs), which run the business traditionally. Therefore, this research is conducted for various MSE actors to understand their efficiency better. This paper uses secondary data from the results of a business-level survey by the Department of Industry and Trade, Magelang City in 2019 within a random cross-sectional framework of 948 micro-enterprises and 199 small-enterprises for the estimates of the inefficiency determinants of Indonesia MSEs which is divided into 2 categories, namely the type of small-enterprise and micro-enterprise. The results based on the cross-logarithmic production function show that capital and labor significantly impact improving efficiency. In addition, the research results show that the reason for the low efficiency of small enterprises is the gender characteristics of corporate actors. For micro-enterprises, the marketing area is the cause of inefficiency, while the location of the business is the cause of the inefficiency of small enterprises.

The Role of Zakat, Infaq and Shadaqah in Indonesia’s Economic Growth: An Islamic Perspective

“…National income become an essential macroeconomic gauge forms a primary pillar guiding economic policies, underscoring its role as a benchmark for a nation's prosperity and policy formulation in the economic sector (Aprelia & Arif, 2023;Islami, et. al., 2023;Koengkan, et.…”