Abstract
Export performance is an important aspect to encourage economic growth and economic prosperity. Export performance can be analysed using export efficiency variable. Export efficiency can be defined as ratio of the actual to potential exports. Knowing the export efficiency and factors affecting it could help policy maker to minimize and mitigate the affects of existing restrictive measures of trade. This study was conducted to analys the efficiency of Indonesia's merchandise exports and the affecting factors using stochastic frontier gravity model. Result of this study shown that Indonesian merchandise export flows with 62 trading partners is significantly positively affected by Gross Domestic Product (GDP) and population, then significantly negatively affected by bilateral distance. The study also found that the average export efficiency of Indonesia to 62 trading partner countries up to 51.35 percent in 2012 and 49.69 percent in 2016. The highest value of export efficiency was in Singapore and the lowest was in Portugal. Result of technical inefficiency model reveals that export inefficiency increased by business freedom, investment freedom, and landlocked dummy, and then export inefficiency decreased by labor freedom, financial freedom, contig dummy and FTA dummy.
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