The Transformation of Comparative Advantage: East Java 1920–1990s

Abstract

East Java is an important economic region in its own right. Its integration into the world economy began in the mid 19th century with the development of plantation exports. However, between the 1920s and the 1970s East Java suffered a 50-year economic hiatus. This paper argues that the hiatus can be explained by structural rigidity, which affected East Java much more than West Java. It analyses foreign and mterisland trade statistics to chart the decline of the old export base of plantation crops and the slow transition towards a new comparative advantage in manufactures that became manifest in the late 1980s.