What happens to industrial structure when countries liberalise? Indonesia since the mid‐1980s

Abstract

In the large literature on the consequences of economic liberalisation, few studies have examined the impact on industrial structure. Indonesia provides a suitable case study: its policy reforms from the mid‐1980s were decisive, and its industrial data base is relatively sophisticated. This article briefly develops a framework with which such issues may be examined, and then assesses the impact of policy reforms on seller concentration, ownership, size distribution, spatial composition, and total factor productivity growth over the pre‐ and post‐reform periods. The main conclusion is that, unlike the liberalisation‐efficiency nexus, the effects of the policy changes on industrial structure appear to be limited. Our conclusions are necessarily tentative, given the short period of time under examination, and given the difficulties — both empirical and theoretical ‐ of establishing the direction of causality.